'The VAT tax should be reduced until the end of 2024'

Arguing that extending the 2% VAT reduction until mid-2024 would not significantly stimulate demand, delegates proposed reducing the tax for the entire following year and applying it to all goods.

This suggestion was raised by the majority of National Assembly deputies during the discussion on extending the 2% VAT reduction until June 2024, on the afternoon of November 20th.

According to Mr. Nguyen Quang Huan, Chairman of the Board of Directors of Halcom Vietnam Joint Stock Company, reducing value-added tax (VAT) will help lower production costs and stimulate demand. "This policy should be applied in the long term, meaning for the whole of 2024, instead of just six months as proposed by the Government ," he said.

Sharing the same view, Mr. Nguyen Duy Thanh, Vice Chairman of the Ca Mau Provincial Business Association, suggested that the National Assembly consider reducing the VAT rate to 8% for the entire next year to make the policy more effective. He also wanted this tax reduction to apply to all goods and services because "discriminating against certain goods and services could inadvertently create inequality in the market."

Elaborating on this aspect, Mr. Duong Khac Mai, Deputy Head of the Dak Nong Provincial Delegation, said that the socio-economic situation has changed, and many sectors and fields that were previously not eligible for tax reductions are now facing difficulties, such as real estate and securities. Therefore, he believes that a reassessment of the actual situation is needed to make the policies more appropriate.

Regarding the implementation period of VAT reduction in the first six months of 2024, the Finance and Budget Committee, during its review, also noted that implementing the policy within six months would be difficult to achieve the target and would not ensure proactiveness and stability. Therefore, the reviewing body proposed a 2% VAT reduction for the entire year of 2024 and suggested that the Government implement solutions to improve the quality of policy development and refine legislation.

Mr. Nguyen Quang Huan, Chairman of the Board of Directors of Halcom Vietnam Joint Stock Company, speaks on the afternoon of November 20th. Photo: National Assembly Media

During the Covid-19 pandemic, this tax reduction policy was implemented to stimulate demand and support the people, but it also resulted in a decrease in budget revenue. According to the government's proposal, the 2024 budget is expected to decrease by 25,000 billion VND if the reduction is implemented over six months, based on a scenario of GDP growth of 6-6.5%. Therefore, in the long term, Mr. Huan believes that a more thorough and comprehensive assessment of the impact is needed, for example, how much the tax reduction will contribute to GDP growth.

"We cannot keep reducing taxes indefinitely because a decrease in budget revenue will affect socio-economic and macroeconomic development," Mr. Huan stated.

Ms. Nguyen Thi Viet Nga, Deputy Head of the Hai Duong Provincial Task Force, also stated that there is no basis to confirm that the 2% VAT reduction created jobs for workers during the recent pandemic. Furthermore, the government has not provided convincing data on the recovery of total retail sales of goods and services thanks to this tax reduction.

Ms. Nga suggested that the Government clearly analyze the impact of the policy on macroeconomic stability, promoting economic growth recovery, and its effect on local budgets.

In his concluding remarks at the end of the discussion session, Finance Minister Ho Duc Phoc stated that extending the 2% VAT reduction until mid-next year aims to alleviate pressure on the budget.

"Reducing VAT is only one measure and only has a short-term effect. Therefore, to help businesses overcome difficulties, a tax reduction for 6 months or a year, combined with other tax and demand-stimulating solutions, is necessary to achieve economic growth targets," he said.

For example, the regulatory agency will study amending the excise tax in 2024 and the personal income tax in 2025, with the trend being towards increasing tax rates.

He further informed that, in addition to the central government's revenue reduction of 25,000 billion VND if the 2% VAT reduction is extended until mid-2024, several localities will also be affected. Specifically, Hanoi will see a reduction of nearly 3,470 billion VND, Ho Chi Minh City nearly 4,000 billion VND, and Binh Duong over 1,150 billion VND. Several other localities will also experience revenue reductions of 350-600 billion VND.

"The National Assembly's recently passed budget resolution only reduces VAT by 2% for the first six months of 2024. If this policy were applied for a full year, the central government budget would lose 50,000 billion VND," Minister Ho Duc Phoc shared.

According to the schedule, the National Assembly will decide on a 2% reduction in VAT on November 29th when passing a resolution at its 6th session.

Mr. Minh

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