Vietnam’s state budget would see a decline by over VND49 trillion ($2.1 billion) this year as the Government will cut the value-added tax (VAT) rate to 8% from the current 10% to aid business recovery, a move which is scheduled to take place since February.
| Customers at Hapro Thanh Cong supermarket. Source: The Hanoi Times |
It was part of a draft decree of the Ministry of Finance (MoF) detailing tax cut policies, which is based on resolution No.43/2022/QH15 of the National Assembly on the socio-economic recovery program.
In addition to a lower VAT rate, businesses’ financial support for the Covid-19 response will be written off on corporate income tax (CIT).
The draft decree, however, noted goods and services in fields of telecommunication, IT, finance-banking, securities, insurance, real estate, metal production, mining, oil refining, chemical products and those subject to excise tax will not benefit from the VAT tax cut.
The MoF estimated the cut would cause a decline of VND49.4 trillion ($2.1 billion) in budget revenue for this year while writing of tax payments from financial supports for the Covid-19 fight would mean foregoing around VND2 trillion ($88 million).
According to the MoF, the Covid-19 pandemic in the past two years has caused severe impacts on the economy and subsequently slower GDP growth, resulting in greater difficulties to realize the five-year economic expansion target for the 2021-2025 period.
“Issues such as rising costs of input materials, disrupted supply chains, and high unemployment rates are posing risks to macro-economic stability,” added the ministry.
The draft decree, in this context, would be instrumental in promoting business/production recovery, it noted.
To minimize impacts from such a move on the state budget, the MoF said it would cooperate with other ministries and localities in ensuring the effective implementation of the Law on Tax Administration, along with steps to reform the tax system, administrative procedures, and prevent tax losses.
