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It emerged on Wednesday that Vietnam's National Assembly Standing Committee has approved plans to reduce the corporate tax rate from 28% to 25%.

It is hoped that the move, which was supported by a majority of the Committee members, will boost the economy and increase Vietnam's competitiveness.

The proposal was put forward by the Finance Ministry for public consultation earlier this year, in addition to plans to simplify the country's priority tax forms, and to increase tax benefits for businesses in sectors including high tech, education, health care, and the environment.

According to the state news agency, the Deputy Chairman of the National Assembly, Uong Chu Luu predicted that Vietnam will have an estimated 500,000 enterprises by 2010, arguing therefore that a tax rate cut will not necessarily mean a reduction in revenue for the state.

However, the proposed cut has been criticised by some observers for not going far enough, in the face of more favourable corporate tax regimes in place in some of Vietnam's regional rivals.