Proposal for National Assembly to reduce VAT by the end of this year due to economic difficulties

According to the Minister of Finance , if this policy is implemented until December 31, the State budget revenue will decrease by about 5.8 trillion VND/month, and if applied for 6 months, it will decrease by about 35 trillion VND.

The content of the Submission stated: To contribute to reducing the cost of goods and services, promoting production and business and creating more jobs for workers, on May 5, 2023, the Government issued Submission No. 188/TTr-CP proposing to add the National Assembly 's Resolution on VAT reduction to the Law and Ordinance Development Program in 2023.

In the context of forecasting the world situation, the domestic situation still has many risks, challenges and unpredictable fluctuations, the level of impact on businesses and people is profound when Vietnam integrates internationally. Although there have been many solutions to support taxes, fees and charges, from the end of 2022 and the beginning of 2023, budget revenue shows a downward trend.

Economic experts predict that the world and domestic situation will continue to become more complicated; difficulties and challenges for the economy and business operations will increase, creating great pressure on macroeconomic stability, affecting the recovery and development of many industries and fields. GDP growth in the first quarter of 2023 reached 3.32%, much lower than the target set in Resolution No. 01/NQ-CP dated January 6, 2023 of the Government, which proposed a GDP growth scenario of 5.6% in the first quarter of 2023.

The government believes that growth is mainly in the service and agriculture-forestry-fishery sectors, while the industrial sector, which has always been the driving force for economic growth, is declining. Many businesses have laid off or furloughed a large number of workers due to business cuts or lack of orders, making life difficult for a segment of workers. This reality is posing many challenges to the growth target for the whole year of 2023.

Therefore, in addition to policies to reduce environmental protection tax on petroleum products, reduce land rent, reduce fees and charges, reducing VAT as applied in 2022 to support people and businesses, according to the Government, is necessary.

The draft Resolution prepared by the Government for the National Assembly to comment and consider for approval has two articles: Adjusting the reduction of VAT rates for goods and services subject to a tax rate of 10%. The reduction of VAT for each type of goods and services will be applied uniformly at the stages of import, production, processing, and commercial business. In particular, business establishments are applied a VAT rate of 8% for goods and services.

Business establishments including business households and business individuals that calculate VAT using the percentage method on revenue will have the percentage rate reduced by 20% when issuing invoices for goods and services subject to 10% VAT. This is the effective date of the resolution. The policy is applied until December 31, 2023.

Assessing the impact of the draft resolution on the State budget, people and businesses, the Government said that the expected reduction in State budget revenue is about 5.8 trillion VND/month, equivalent to about 35 trillion VND if applied in the last 6 months of the year. The reduction in VAT will contribute to reducing the cost of goods and services, thereby promoting production and business and creating more jobs for workers, contributing to stabilizing the macro economy and economic recovery in 2023.

For the people, this is the group that will directly benefit from this policy. The reduction of VAT on goods and services subject to the VAT rate of 10% will contribute to reducing selling prices, thereby directly reducing people's costs in consuming goods and services serving people's lives.

Enterprises producing and trading goods and providing services subject to VAT at a rate of 10% will benefit when the policy is issued. The reduction in VAT will contribute to reducing production costs and lowering product prices, thereby helping enterprises increase their ability to recover and expand production and business.

In addition, the policy contents proposed in the draft Resolution are all consistent with Vietnam's international commitments and are not contrary to the commitments in international treaties that Vietnam has participated in and is a member of.

Reduce VAT on taxable goods from 10% to 8%

Aiming to stimulate consumption, economic recovery and development, in 2022 the National Assembly issued Resolution No. 43/2022/QH15 dated January 11, 2022 on fiscal and monetary policies to support the Socio-Economic Recovery and Development Program, including a policy to reduce VAT rates by 2% in 2022. The VAT reduction of about VND 44 trillion has contributed to stimulating consumption and promoting production and business development.

However, in addition to the achieved results, during the implementation process, both taxpayers and tax authorities have encountered difficulties in determining goods and services that are not eligible for tax reduction. Regulations excluding certain groups of goods and services as in Resolution No. 43/2022/QH15 increase compliance costs for taxpayers and collection costs for tax authorities (many types of goods and services, when determining subjects that are not eligible for tax reduction, require the coordination of many relevant ministries and branches).

Therefore, in 2023, the Government proposed to reduce the VAT rate by 2% for all goods and services subject to the 10% tax rate (to 8%); reduce the % rate to calculate VAT by 20% for business establishments (including business households and individual businesses) when issuing invoices for all goods and services subject to the 10% VAT rate.

According to the Ministry of Finance, implementing this plan aims to ensure the right target of stimulating consumption, in line with the current economic context, thereby promoting production and business activities to recover and develop soon to contribute back to the State budget as well as the economy.

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