in line with most existing studies on informal firms’ entry and exit, the latter is a novel and important indicator for studying how household businesses cope with economic shocks in the short term. To examine sectoral impacts, we also rely on data on operating industry and location of the business.<sup>10</sup>

# **2.2 Entry and exit**

By the nature of the dataset, this analysis focuses only on tax-registered household businesses. While we do not observe HBs that are not tax-registered, data from the latest Vietnam Enterprise Census (VEC) that is collected every five years, the last time in 2017, shows that there are approximately 5 million HBs operating in the country.<sup>11</sup> Table 1 shows the total count of tax filings retrieved from the DoT portal for the January 2018-August 2020 period. The first three columns show records for regular annual filings. Column 1 reports the total number of (once-a-year) annual lump-sum filings, the majority of which usually take place each year in January (approximately 90 percent of records). The number of registered HBs increased slightly from over 908,679 firms in 2018 to 917,917 in 2019. The total registered HBs was on the rise in 2020, with 907,472 filings having been recorded as of August (note that since most filings happen in January including for the year 2020, the existing statistics mostly capture pre-COVID-19 tax filings). Overall, these numbers represent approximately one-fifth of the total household businesses operating in the country.<sup>12</sup> It is, therefore, noted that the majority of household businesses in the country are not tax-registered.<sup>13</sup> In each year, we distinguish between incumbents and new businesses using available identification information (tax ID). “Repeated” (column 2) is the number of filing records in a given year that also appeared in the previous year, and “New” (column 3) is the number of filing records that appeared in the dataset for the first time in the current year. The data suggest entry and exit rates of household businesses of about 5-6 percent a year during 2018-2019.<sup>14</sup> The category of “irregular filing”, housed in separate databases from the regular annual filing database, is of particular interest. “Closure filings” defines the number of firms that filed to (permanently) close their business. “Suspension filings” defines the number of firms that filed to (temporarily) suspend the business in at least one month of a given year.<sup>15</sup> While the former provides a measure of exit in line with earlier studies, we believe the latter is a new indicator that captures how household businesses cope with idiosyncratic or economy-wide shocks

> 10The data on operating industry is only available for 2018 and 2019.

> 11The VEC is collected by the General Statistical Office of Vietnam (GSO) once every five years, the last round in 2017. The survey includes data on both formal enterprises and household businesses operating in the country (Le et al., 2020).

> 12This number also aligns with data from the 2017 VEC, which shows that there are over 850,000 HBs reported in the census that possess a tax ID, approximately 135,000 of which located in Ho Chi Minh city and 71,000 in Ha Noi.

> 13See Le et al. (2020) for a discussion of pull and push factors related to HB registration incentives.

> 14Certain HBs might have closed the business without officially filing for business closure. The repeated and new filings are subject to errors due to provincial tax offices’ tax-ID reporting timeline and accuracy. In provinces where we do not obtain complete tax-ID information of HBs, we approximate the incumbency/entry rates using the corresponding rates observed in the previous year.

> 15Note that Table 1 reports the total number of firms filing for suspension for at least one month in a year. The corresponding total number of suspension filings in each year (i.e., inclusive of multiple filings per firm-year) are 655,244; 570,933; and 776,934 in 2018, 2019, and January-to-August 2020, respectively.

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