Disagree with the 2% VAT reduction for banks and insurance

Promote production and business activities

Continuing the 23rd session, the National Assembly Standing Committee (NASC) gave opinions on the draft Resolution on reducing value added tax.

Presenting the report, Minister of Finance Ho Duc Phoc said that, with the aim of stimulating consumption, economic recovery and development, in 2022 the National Assembly issued Resolution No. 43 on fiscal and monetary policies to support the Socio-economic Recovery and Development Program, including a policy of reducing the value added tax (VAT) rate by 2% in 2022.

The total reduction in VAT of about 44 trillion VND has contributed to stimulating consumption and promoting production and business development.

Policy - Disagree with the 2% VAT reduction for banks and insurance — Minister of Finance Ho Duc Phoc presented the report.

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 for calculating 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.

"Implementing this plan aims to ensure the right goal 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," said the Minister of Finance.

According to Minister Ho Duc Phoc, the reduction in VAT is expected to reduce the state budget revenue by about 5.8 trillion VND/month, if applied in the last 6 months of the year, it will be equivalent to about 35 trillion VND.

Reducing 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.

Disagree with VAT reduction for banks and securities

Reporting on the review of the draft Resolution, Deputy Chairman of the Finance and Budget Committee Nguyen Van Chi said that the majority of opinions in the Standing Committee of the Finance and Budget Committee agreed with the necessity of issuing a Resolution on VAT reduction to support the production and business sectors and people who have faced many difficulties after the Covid-19 pandemic in the context that the growth rate has begun to show a downward trend since the fourth quarter of 2022 and especially in the first months of 2023. The Government's submission to the National Assembly for consideration and issuance of a Resolution on VAT reduction is within its authority according to regulations.

The Standing Committee of the Finance and Budget Committee and the Standing Committee of the Law Committee basically agreed to add this content to the 2023 Law and Ordinance Development Program.

Compared to Resolution No. 43, the Government's draft has expanded the scope of the 2% value-added tax reduction to apply to goods and services subject to special consumption tax and other fields such as: Banking, securities, insurance, real estate business, mining, telecommunications, information technology, etc.

However, according to the examining agency, the Government's submission did not clearly explain the reasons for proposing to expand the scope of application to a number of major sectors and fields.

According to the Standing Committee of the Committee, in the difficult situation due to the Covid-19 pandemic in early 2022, when issuing Resolution No. 43, the National Assembly considered and excluded a number of areas that were not really necessary from the scope of VAT reduction.

“At present, it is expected that the State budget revenue in 2023 will still face many difficulties. Therefore, the majority of opinions in the Standing Committee of the Finance and Budget Committee do not agree with the expansion of the scope of application and suggest that the value-added tax should only be reduced to the same extent as in 2022 according to Resolution No. 43,” said Ms. Nguyen Van Chi.

Policy - Disagree with the 2% VAT reduction for banks and insurance (Figure 2). — Deputy Chairman of the Finance and Budget Committee Nguyen Van Chi reported the review.

The Standing Committee of the Finance and Budget Committee proposed that the Standing Committee of the National Assembly submit to the National Assembly for promulgation a Resolution to continue applying the VAT reduction policy as stipulated in Resolution No. 43. The application period is from the time the Resolution is passed until December 31, 2023.

Expressing agreement with the policy of reducing VAT, the National Assembly Chairman proposed the scope of application as in Resolution 43. The National Assembly Chairman clarified that the contents of Resolution 43 have been carefully evaluated and calculated, and the thinking of reducing to stimulate demand and increase revenue is correct.

However, the current situation is different from the time right after the pandemic, the revenue situation in 2023 is very difficult, businesses are in trouble, people are in trouble, so the concern is whether the policy will really stimulate demand or not.

The National Assembly Chairman believes that taking the increase in revenue and total retail sales to increase compensation is not a clear assessment. Therefore, based on existing practices, the National Assembly Chairman proposes to apply the scope as in Resolution 43.

The National Assembly Chairman noted that the draft Resolution should stipulate that the Government is responsible for timely implementation. The Standing Committee of the National Assembly and the National Assembly require that budget revenue not be reduced according to the approved estimate and that the budget deficit for 2023 not be increased.

Emphasize the need to organize implementation in a way that is feasible, both reducing and stimulating demand, using that stimulus to compensate for the shortfall in revenue, which is beneficial to both people and businesses but does not reduce budget revenue.

At the same time, it is recommended that agencies consider arranging this content for discussion together with discussions on the socio-economic situation, group discussions, hall discussions and include it in the provisions of the General Resolution of the session to ensure compliance with the order of the Law on Promulgation of Legal Documents.

Concluding the discussion, Vice Chairman of the National Assembly Nguyen Duc Hai said that the Standing Committee of the National Assembly agreed to add the law and ordinance development program in 2023 to submit to the National Assembly for consideration and decision on reducing value-added tax. The Vice Chairman of the National Assembly requested the submitting agency to learn from experience in sending documents late to the Standing Committee of the National Assembly .

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