Gov’t finalizes 2% VAT cut plan for goods and services
With the VAT cut to 8% in the second half of this year, the government estimates a revenue loss of VND24 trillion (US$1 billion).
The Government has finalized the plan to reduce the VAT on certain goods by 2%, except for those in the telecommunications, real estate, securities, insurance, and banking sectors.
Production at Garment 10 Company in Hanoi. Photo: Khac Kien/The Hanoi Times
A proposal to this effect was submitted by the Government to the National Assembly on May 24, providing for a 2% VAT cut to come into effect in the second half of 2023.
The group of goods and services not subject to VAT reduction also includes information technology, finance, banking, metals and prefabricated metal products, mining products, refined petroleum, chemical products, and items subject to excise tax.
Speaking at the parliamentary session, Minister of Finance Ho Duc Phuc said the tax reduction aims to stimulate consumer demand and facilitate a rapid recovery of production and business activities.
Le Quang Manh, Chairman of the National Assembly's Finance and Budget Committee, urged the Government to conduct a comprehensive assessment of the potential impact of the tax reduction to ensure that it effectively achieves its intended goals of stimulating consumer demand and boosting production and business activities, while at the same time ensuring revenue for the State budget.
The VAT reduction to 8% in the second half of this year would reduce budget revenues by about VND24 trillion (US$1 billion).
In response to this estimate, the Finance and Budget Committee has asked the Government to provide a more detailed explanation of the plan and measures to offset the revenue loss and ensure budget stability for the current year.
In addition, the committee stressed the need for the Government to expedite the resolution of issues related to VAT refunds to businesses.
Following the Government's proposal, many National Assembly deputies expressed their support for the move, saying it was a means to stimulate consumption demand amid the prevailing economic challenges and reduced aggregate demand.
Deputy Le Thanh Van from Hanoi advocated a higher reduction rate of 3-5% to help enterprises reduce costs, increase sales and stimulate overall economic growth. He stressed that by enabling businesses to improve their profitability, they would be more inclined to meet their tax obligations.
Tran Van Lam, a permanent member of the Committee on Finance and Budget, opined that the 2% VAT reduction to be implemented in 2022 is reasonable. He argued that not all groups of goods and services need the same consumption stimulus. Therefore, a uniform reduction across all goods and services may not be necessary.
In addition, deputies agreed that the duration of the tax reduction should be extended, possibly until 2024, to ensure the implementation of a long-term and stable policy. This approach aims to avoid abrupt changes that could cause difficulties for businesses and enforcement agencies alike.