The National Assembly (NA) will discuss the VAT reduction from the existing 10 per cent rate to 8 per cent on June 1 before receiving an approval from NA deputies in a resolution slated for June 24, the last day of the ongoing fifth session.
The VAT cut proposed by the government is set to be applied from July 1 to the end of 2023 for all types of goods and services currently subject to a 10 per cent VAT rate. The initiative is part of Resolution No.43/2022/QH15 released early last year on fiscal and monetary policies supporting the Programme on Socioeconomic Recovery and Development.
|Consumers of many types can benefit from VAT cuts, photo Le Toan |
Under Resolution 43, the 2 per cent cut was applied last year for goods and services subject to a 10 per cent rate, except for various goods and services such as telecommunications, IT, financial and banking activities, securities and insurance, trading of real estate, metal and precast metal products, mining products (excluding coal mining), coke mining, refined oil, chemical products, and goods and services subject to excise tax.
“Last year, the VAT reduction helped people and enterprises with about VND44.5 trillion ($1.93 billion), contributing to reducing the prices of goods and services, and boosting business and production activities with new employment created. This also contributed to stimulating domestic consumption and enriching state coffers,” said Minister of Finance Ho Duc Phoc.
Specifcially, total goods retail and consumption service revenues in 2022 increased 19.8 per cent on-year, while revenue from domestic VAT did not decrease, but rose 10 per cent on-year.
However, since the initiative terminated at the end of 2022, people and enterprises remain in difficulties.
“The reduction of VAT for all types of goods and services currently subject to a 10 per cent rate shall be applied uniformly at the stages of import, production, processing, and business and trade,” said the government in a report to the NA.
Under the report, business establishments including business households and individuals that calculate VAT by the method of percentage on turnover are entitled to a 20 per cent reduction in tax calculation when they issue invoices for goods and services currently subject to the 10 per cent rate.
“In order to promptly respond to developments in the socioeconomic situation, in addition to the solutions that have been and are being implemented for 2023, the continuation of the reduction of VAT as already applied in 2022 to support businesses and individuals is necessary,” said the Ministry of Finance (MoF).
Nguyen Manh Dung, director of home appliance trader Manh Dung JSC in Hanoi, said that many businesses like his are pleased the policy will be continued.
“The policy is necessary for businesses because, so far this year, businesses are struggling and more enterprises have been going bankrupt,” Dung said. “The existing purchasing power remains quite feeble. We have applied many promotion programmes to push sales, but the difficulties seem bigger,” Dung said.
He also added, “The 2 per cent VAT reduction will last only six months, then will be resumed to 10 per cent, and this will be just a short-term solution. What enterprises need now is long-term solutions from the state so that they can stay afloat.”
The European Chamber of Commerce said VAT reduction has played a key part in speeding up economic recovery, and has been a boon to businesses and consumers. Such a reduction has helped with the government’s efforts in bringing inflation under control, boosting consumption and encouraging enterprises to invest in expanding their operations.
Consumers have also benefited from the lower VAT, which is in line with the government’s policy to aid the population post-pandemic. With this initiative, the MoF estimates, the budget will reduce revenues by VND4 trillion ($173.9 million) per month and VND24 trillion ($1.04 billion) in the second half of 2023.
“The reduction of VAT will contribute to reducing the cost of goods and services, thereby promoting production and business activities and creating more jobs for workers,” said MoF Minister Phoc. “The public will directly benefit from this policy. The VAT reduction will contribute to a decrease in selling prices, thereby contributing to a direct reduction in people’s costs for consumption of goods and services.”
According to the MoF, enterprises that produce and trade in goods and provide services subject to VAT at the rate of 10 per cent will benefit when the policy is issued. The reduction of VAT will contribute to reducing production costs, lowering product costs, thereby helping businesses increase resilience and expand production and business activities.
What is more, with the orientation to stimulate economic demand, increase production and business to promote economic development, the MoF also proposed many other support policies, such as lowering the collection rate of 35 fees and charges in the second half of the year, equivalent to a decrease in revenue of VND700 billion ($30.43 million) to support businesses and people.
Additionally, to assist the public and businesses, the government last month also enacted Decree No.12/2023/ND-CP on extending the deadline for paying VAT, corporate income tax, personal income tax, and land rental in 2023.
However, the National Assembly’s Financial and Budgetary Committee cited some who proposed that the scale of those subject to the 2 per cent VAT reduction should be expanded as all sectors in the economy are facing massive difficulties.
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