March 2018—When Do Xuan Hung, finance director of the Regent Garment Co., looks back on paying social security contributions for the company’s 17,500 employees, it brings back some painful memories.

“Before 2015, procedures were both complicated and inconsistent. It was an extremely time-consuming process,” he said.

Such burdensome procedures were not limited to social security; they were ingrained into the entire tax payment system.

“I remember when tax departments would be crowded with accountants clutching forms,” recalled Nguyen Minh Thao, head of the Business Environment and Competitiveness Department of the Central Institute for Economic Management (CIEM) at the Ministry of Planning and Investment.

Those were the days when business representatives had to stand in line for hours to file their taxes. Complying with complicated procedures, which required businesses to make 32 separate payments, could consume up to 872 person-hours per year. According to the World Bank’s Doing Business Report 2017, Vietnam ranked a low 172 out of 189 countries for ease of paying taxes.

In response, starting in 2014, USAID collaborated with CIEM to reform administrative procedures for paying taxes, including employee social security contributions. USAID has been pivotal in driving the reforms that helped Vietnam’s ranking jump by an astonishing 82 places in the 2018 Doing Business Report, from 168 to 86.

Apart from providing expertise in international best practices, USAID worked closely with CIEM and Social Security Vietnam to conduct field studies in different regions and better understand the difficulties businesses faced on the ground. This knowledge- and evidence-based approach was a driving force for reform.

“These activities provided evidence on which to base reforms and convince policymakers,” said Thao. “To make good policy, we need to understand the reality.”

Nowadays, tax departments across the country are mostly deserted — online platforms for filing tax and social security payments have put a stop to the long lines. Reforms to tax laws and procedures have led to the number of separate payments being reduced from 32 to 14, saving businesses up to 374 person-hours each year.

The online platform for social security payments has also provided much needed transparency for workers. For the first time, workers can track the status of their social security payments.

Nguyen Thi Cuc, chairwoman of the Vietnam Tax Consultants’ Association, noted that workers of all kinds, including taxi drivers and manual laborers, “can track their social security status online in just a few clicks. They can easily check that their employer has fulfilled their obligation to pay employee social security contributions.”

For Do Xuan Hung at the Regent Garment Co., the reforms have begun to pay dividends: “Submitting social security contributions online has become much simpler — the number of staff needed to complete the process has been cut by half.”

In benefiting both employers and workers, the reforms are enhancing the competitiveness of businesses while ensuring that workers have access to essential social services.

“With funds saved, we’ve been able to conduct training courses for our staff, improving skills across the company,” says Hung.   

This work has been supported by USAID’s Governance for Inclusive Growth (GIG) Program, which runs from 2015 to 2018. The program works with the public and private sectors in Vietnam to enhance governance to facilitate trade and broad-based growth, with an emphasis on improving the legal and regulatory environment and systems for accountability and inclusion.

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