Vietnamese Gov't plans to continue VAT cut for second half of 2024
Vietnamese Gov't plans to continue VAT cut for second half of 2024
If the VAT reduction policy is continued for the last six months of the year, the total revenue loss for 2024 is projected to be approximately VND47.5 trillion (US$1.87 billion).
Given the ongoing challenges faced by businesses, the government has submitted a proposal to the National Assembly, seeking permission to extend the 2% reduction in the value-added tax (VAT) rate for certain categories of goods and services for the final six months of 2024. Vietnam's current VAT rate is 10%.
Locals buying goods at a supermarket in Hanoi. Photo: Thanh Hai/The Hanoi Times |
In the proposal to the National Assembly, the Government assessed that the Covid-19 pandemic‘s severe and prolonged consequences, compounded by other objective impacts, have posed significant challenges in the socio-economic sphere. All sectors have been profoundly affected.
During the 2020-2023 period, fiscal policy measures to alleviate production and business difficulties were enacted, with the total value of tax exemptions, reductions, extensions, and land rental fees reaching approximately VND700 trillion (US$27.5 billion).
Notably, measures in place since the beginning of this year amount to around VND68 trillion ($2.67 billion).
Among them, the 2% reduction in value-added tax (VAT) by 2% from January 1 to June 30 accounts for about VND25 trillion ($984 million); the reduction in environmental protection tax on petrol, oil, and lubricants in 2024 amounts to around VND42.5 trillion ($1.67 billion); the reduction in fees totals approximately VND100 trillion ($3.93 billion).
At its session, the National Assembly passed Resolution No.103/2023, which sets a GDP growth target of 6-6.5% for 2024.
However, the forecast for the period ahead points to rapid and complex global and regional developments; the recovery of major trading partners remains slow, posing risks of disruption to the supply chain and global value chains. Domestically, challenges outweigh opportunities and conveniences.
Domestic consumer demand is a key driver of economic growth. Fiscal policy solutions are therefore needed to boost domestic consumer demand.
Hence, the Government believes it is necessary to implement effectively the support measures in terms of tax, fee, and land rent reduction enacted in 2023 and to study and propose some solutions for 2024.
Specifically, the government proposed to continue to consider a 2% reduction in VAT; deferral of VAT, corporate income tax, special consumption tax, and personal income tax; reduction of certain fees, as well as land rental fees already in place since 2023, to further alleviate difficulties and support production and business activities.
Based on the evaluation of the results achieved by the 2% VAT reduction policy, the Government has submitted a proposal to the National Assembly to consider the continuation of the 2% VAT reduction policy for certain groups of goods and services subject to a 10% VAT rate in the last six months of this year.
Specifically, the policy will apply from July 1 to December 31, and the Government will be responsible for implementing it.
According to the Government's calculations, implementing the 2% VAT reduction policy for the last six months of the year will reduce state revenues by approximately VND24 trillion ($944.7 million), equivalent to VND4 trillion ($157.4 million) per month.
In the first three months of the year, the VAT reduction under this policy amounted to approximately VND11.4 trillion ($449 million). If the VAT reduction policy is continued for the last six months of the year, it is projected that the total revenue reduction for the year 2024 will be around VND47.5 trillion ($1.87 billion).
