US tax-cut bill nears Senate approval 

President Barack Obama makes a statement about the senate vote on middle class tax cuts in the Brady Press Briefing room of the White House in Washington, December 13, 2010.

President Barack Obama’s sweeping plan to extend expiring tax cuts for millions of Americans headed for overwhelming passage in the Senate on Wednesday, putting the measure’s fate in the hands of the House of Representatives.

As the Senate neared what appeared to be a rare bipartisan vote on the bill to renew all Bush-era income tax breaks and add some provisions designed to stimulate the US economy, House Democrats mulled ways to pull back on some of the measure’s tax breaks for the wealthy.

But even liberal House Democrats acknowledged there might not be enough support to significantly alter the legislation brokered by Obama and congressional Republicans that includes expanded tax breaks for wealthy estates.

“My guess is that the whole package passes,” said liberal Democratic Representative James Moran. “The Democratic caucus might not support it,” he said, but added, “I don’t know how much leverage there is” to significantly alter the bill.

Before the Senate votes, it will debate three initiatives that likely will fail: a Republican plan making all of the Bush-era tax cuts permanent, another Republican plan requiring that extended jobless benefits be paid for through spending cuts, and a Democratic proposal excluding the wealthiest 2 percent from tax cuts.

While there had been talk of trying to curtail tax breaks for ethanol blenders, no such amendment will be allowed in the Senate.

The package also got a boost in the House, where it faces its stiffest resistance, when a top Democrat said there are “compelling reasons” to pass it.

The bullish comments by House Democratic Majority Leader Steny Hoyer signaled opposition was dissipating among Democrats who believe Obama’s $858 billion tax deal, brokered with the opposition Republicans, is too generous to the wealthy.

The measure cleared a key Senate procedural hurdle on Monday, with 83 of the chamber’s 100 members voting in favor of moving the bill forward.

It extends for two years all Bush-era individual tax rates, prevents a spike in taxes on capital gains and dividends and renews long-term insurance for the jobless, while providing an assortment of new tax breaks for students, working families and businesses.

Economists have boosted growth forecasts based on the bill’s likely passage, citing in particular a one-year cut in the payroll tax and removal of uncertainty about taxes in general.

At the same time, deficit watchers fear the measure’s impact on the nearly $14 trillion federal debt.

Monday’s bipartisan vote was in sharp contrast to the gridlock that has tied the Democratic-led chamber in knots for much of the first two years of Obama’s presidency.

“The vote in the Senate indicates an urgency that is felt by a broad spectrum that the middle-income taxes not be increased come January 1,” Hoyer told reporters.

“Rarely do you see that big a number” in support of a bill, Hoyer said, also noting a swath from the very liberal to the very conservative backed it.

Obama and most of his fellow Democrats had pushed for extension of the tax cuts enacted by former President George W. Bush only on household income of up to $250,000.

Democrats lost control of the House and saw their margins shrink in the Senate in the November 2 elections, pushing Obama to strike the deal before the Republicans take more power in January.

Estate tax

A bid by some House Democrats to tighten an estate tax provision to make it less generous for the wealthy is expected to fail, but could slow down eventual passage.

On Monday, Moody’s Investors Service warned it was considering cutting the United States’ top-notch triple-A bond rating in the next two years if the package becomes law because it would push up debt levels.

Worries about the bill’s potential affect on the federal deficit prompted a two-day sell-off of US Treasury bonds last week.

Lawmakers have said they want to recess for the year by the end of the week, though that timeline is tentative.

Many House Democrats believe Obama struck an especially bad deal on the estate tax, conceding to Republican demands it exempt the first $5 million of inherited assets from taxes, with estates above that taxed at 35 percent.

Democrats favor a $3.5 million exemption and a 45 percent tax rate.

Hoyer said many Democrats want a separate amendment on the estate tax, but also said there is concern that debate over estate taxes could derail the whole deal and that no decision had been made.

“Given all of the problems facing this country, lowering taxes for people who are extraordinarily wealthy, whose incomes are soaring, whose tax rates are going down, should not be a major priority of the US Senate,” said Senator Bernie Sanders, an independent who helped lead the opposition.

Still, a senior House Democratic aide said he doubts there are enough members to back a weakened estate tax.

“It would give members a chance to vent to vote against it,” the aide said. “But I doubt” there are enough votes to change it.

Stimulus package for tourism sector

LookAtVietnam – Since the beginning of this year, Vietnam has been implementing the stimulus package “Impressive Vietnam” to attract more tourists to the country.  Under this programme, tourists will enjoy a 30-50 percent discount for tours nationwide.

Positive signs

There have been positive signs for the tourism sector this year during the Lunar New Year festival. Vietnam welcomed many international visitors from ASEAN member countries to famous World Heritage sites such as Ha Long Bay, Hue and the ancient city of Hoi An.

Dr Tran Huu Son, Director of the Lao Cai Department of Culture, Sports and Tourism said that the number of visitors, especially Chinese tourists to the province has increased sharply in the first months of this year. He added that the province is creating a promotional package to attract more tourists, especially Chinese visitors.

There has also been a rise in the number of international visitors to Hanoi. The five-star hotel, Sheraton Hanoi, has cooperated with travel agencies to offer all-inclusive tours to visitors coming from Australia, the Republic of Korea, American and Europe. Many five-star hotels have special programmes including Meetings, Incentives, Conferences and Exhibitions (MICE) package tours for customers. Do Khanh Tra, director of foreign relations at the InterContinental Hanoi said that the occupation rate amounted to 98 percent thanks to a special discount for those who stay three nights or more.

Nguyen Van My, director of the Lua Viet Company said Vietnam Airlines has recently reduced its airfares for tourists to the central and northern regions and his company has reduced the cost for their tours to these destinations by 35 percent.

During March (the Month of Youth), the company is arranging for students and other young people to visit Cambodia at a preferential price of only US$119.

However, the deputy minister of Culture, Sports and Tourism Tran Chien Thang said that “We should not offer tours at a huge discount. We focus on target markets and tourists but should not force travel agencies to reduce prices.

Challenges

Under the “Impressive Vietnam” promotion campaign the tourism industry will have 99 tours discounted by 30-50 percent from now until September. However, after launching the promotional campaign, the Vietnam Administration of Tourism (VAT) has not negotiated with the transport sector to reduce travel costs, or has yet to create favourable conditions for travel agents to promote their marketing activities.

It will take at least another two months to put discounted package tours in place, but few tourists from Europe like to come to Asia for their summer vacation in June.  They prefer to travel to the region in October and the promotional programme will be over.

Another snag is the failure of travel agents and service providers to coordinate in terms of transportation and tour guidance. Under the programme, there will be a 30-50 percent discount for hotel rooms as well as airfares for both international and domestic flights.

Vietnam has launched its promotional programme at a time when Thailand and many other countries in the region have done the same. According to Luu Duc Ke, General Director of Hanoitourist, the late timing and lack of co-ordination between local outfits have reduced the competitiveness of tourism industry.

In the first two months of this year, Vietnam welcomed about 688,000 tourists, 10.3 percent lower than the same period last year. If the country fails to overcome the challenges ahead, its tourist industry will be not strong enough to compete against its foreign rivals in the long-run.

VietNamNet/VOV

Warning on $1 billion stimulus package


Business leaders say the government should focus its stimulus spending on improving infrastructure, such as ports

The government should carefully consider the use of a stimulus package of over US$1 billion that it plans to spend on spurring investment and consumption, analysts warn.

“With its limited funds, Vietnam should pinpoint the beneficiaries of the stimulus package,” Vo Tri Thanh of the Central Economic Research and Management Institute said.

He added that the key measure to boost investment is strengthening support for small and medium-sized enterprises and fostering rural production.

Cao Si Kiem, chairman of the Vietnam Association of Small- and Medium-Sized Enterprises, said the country should spend the stimulus package on helping all firms reeling from the high inflation, without choosing between large and small ones.

The chairman of the Vietnam Chamber of Commerce and Industry, Vu Tien Loc, said, however, the government should assist firms with potential for development but in temporary difficulties.

Kiem, a former governor of the State Bank of Vietnam, said the government should deploy the package to develop infrastructure, including ports, airports and roads, and housing, especially for low-income earners.

Thanh agreed, saying that the government should pour money into infrastructure and social welfare for the poor.

Nguyen Minh Phong of the Hanoi Socio-economic Research Institute said the government, to boost investment, should intensify trade and investment promotion, foster administrative reform, further cut taxes to help businesses, boost credit guarantee, and accelerate the equitization process.

It should also improve the quality of its analysis and forecast of the global financial and economic situation, and work out measures to cope with changes, flexibly adjust interest and foreign exchange rates, and closely monitor outstanding loans, he added.

The recent cuts in fuel prices are thought to be a good move to strengthen consumption and beef up people’s purchasing power. The government last lowered gasoline prices on Wednesday, cutting them by VND1,000 a liter to VND 11,000 as world oil prices hover around $43 a barrel.

It is the 10th reduction since the retail price reached a high of VND19,000 last July when world prices hit a record of over $147 per barrel.

The government also needs to increase the quantum of consumption loans, remove hurdles to obtaining consumption loans, enable retailers and distributors to access loans to purchase stocks, and increase salaries for public employees, Kiem said.

It is also necessary to encourage people to buy Vietnamese goods, he added.

Phong said the government should reduce personal and corporate income taxes, increase social welfare support to the poor and people living in disaster-hit areas, and reduce education and medical fees.

Monitor stimulus package

The economists said the government should closely monitor the use of the stimulus package to ensure its proper use, and mobilize all international and domestic resources to spur investment and consumption.

The government should focus on both reducing inflation and preventing an economic slowdown, and ensuring there is enough liquidity in the economy to meet investment and consumption needs, Kiem said.

The economy is expected to grow at 6.7 percent this year, compared with 8.48 percent last year. At the beginning of the year, the government expected growth of up to 9 percent.

The government has also lowered its inflation forecast for the year to 22 percent from an earlier estimate of 24 percent.

It is scheduled to approve the stimulus package at a meeting later this month, and release details of how or when the money would be spent.

TARGETING CONSTRUCTION, HOUSING

Most of the government’s $1 billion stimulus package would be spent on construction projects and housing for people most affected by the slowing economy, Deputy Minister of Planning and Investment Cao Viet Sinh told Bloomberg Thursday.

The plan, scheduled to be submitted to Prime Minister Nguyen Tan Dung for final approval next week, would be carried out early in 2009, Sinh said.

The government may lend the money, less than 1.2 percent of

Vietnam’s gross domestic product, at a zero percent interest rate, Minister of Planning and Investment Vo Hong Phuc said in a December 9 interview on national television.

Small- and medium-sized companies would not benefit from the spending as they have received support through measures like reductions in interest rates and corporate tax cuts, Phuc said.

The government may also provide guarantees to help the companies gain access to loans, Phuc said.

Reported by Ngan Anh