VAT cut to aid business development

VAT cut to aid business development

The Ministry of Finance asked for feedback on March 24 regarding a draft resolution to cut VAT.

The ministry (MoF) has proposed reducing VAT by 2 per cent from July 1, 2025, to December 31, 2026, for goods and services currently subject to a 10 per cent VAT rate, bringing it down to 8 per cent.

VAT cuts aim to stimulate consumption. Photo: baodautu.vn

The MoF stated that from 2022 to the first half of 2025, the National Assembly (NA) had decided to reduce the VAT rate by 2 per cent for goods and services subject to the 10 per cent VAT rate, except for certain categories, such as telecommunications, IT, financial services, banking, securities, insurance, real estate business, metals, cast metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products, and goods and services subject to special consumption tax.

In the first two months of 2025, the estimated reduction in VAT revenue was approximately $332 million.

Continued VAT reduction will prove crucial to stimulate economic development, support citizens and businesses, and propel production, tourism, and domestic consumption in 2025 and 2026, aligned with the government's development goals.

According to the MoF's calculations, the expected reduction in state budget revenue for the second half of 2025 and the entirety of 2026 would be approximately $4.87 billion, of which $1.58 billion would be lost in H2 of 2025, and around $3.29 billion in 2026.

The MoF noted that the VAT reduction would directly lower costs of goods and services.

For businesses, the tax cut will help curtail production costs, and slash product prices for businesses that produce goods or provide services.

This would increase the competitiveness of businesses' products, boost sales, expand production, and create more jobs.

To offset the revenue shortfall caused by implementing this policy, the MoF proposed that the government direct ministries, central agencies, and local authorities to adopt the following measures.

First, focus on implementing fiscal tasks, solutions, and policies according to resolutions issued by the National Assembly and the government to remove difficulties for businesses and citizens, and striving to attain GDP growth of at least 8 per cent in 2025, possibly reaching double-digit growth.

Second, enhance management, auditing, and inspections, streamline administrative procedures, and accelerate digital transformation in tax management, especially in key sectors and regions, aiming to increase tax revenue in areas and fields that can offset the loss. The target is to increase state budget revenue by about 10 per cent in 2025 compared to the estimated 2024 figure.

Third, tighten state budget expenditure, strengthen cost-saving measures, and utilise reserves, contingency funds, and other legal resources to finance disaster prevention, disease control, and other urgent tasks, while ensuring a balanced budget at all levels.

The MoF has also proposed expanding the scope of the VAT cut to encompass more product groups, such as IT products and services (such as washing machines, microwaves, data processing services); cast metal products (such as metal containers, tanks, tools, boilers); coke, refined petroleum products; chemical products (such as fertilisers and nitrogen compounds, plastics, and synthetic rubbers in their primary form); coal at import stage and coal sold in commercial transactions; petrol, and oil.

VIR