The General Statistics Office (GSO) reported that the total state budget revenue in the first eight months of 2022 reached VND1.208 trillion, or 85.6 percent of yearly estimates and represented an increase of 19.4 percent compared with the same period last year. 

Of this, domestic receipts were estimated at VND954.6 trillion, equal to 81 percent of the yearly estimates and increasing by 15.9 percent compared with the same period of the previous year. As such, the budget revenue nearly reached the target for the year.

The Ministry of Finance (MOF) commented that the budget collections in the first eight months of the year was good if compared with the same period of recent years. Of this, some taxes had good growth rates compared with the same period last year. 

The revenue from state-owned enterprises in the first eight months of the year reached 74.7 percent of the yearly plan, an increase of 9.5 percent, while revenue from non-state industries, trade and services was 82 percent, up by 18.4 percent. The revenue from personal income tax collections was 98.9 percent, an increase of 27.7 percent over the same period last year.

The state budget collections are increasing when most businesses are still facing big difficulties caused by Covid-19, the pressure from input material price increases, the lack of orders, and the lack of capital to run production.

According to GSO, in H1 2022, the prices of input materials for domestic production increased by 6.04 percent over the same period last year. The sharpest increase was seen in the agriculture sector, over 10 percent, while the processing and manufacturing industry increased by 5.78 percent and the construction sector by 9.32 percent.

The Vietnam Confederation of Commerce and Industry (VCCI) said the biggest problems of its member enterprises are the high petrol prices and the 20-30 percent increase in import input material prices. 

Meanwhile, logistics costs have increased by 15-20 percent in comparison with 2021, while logistics costs in 2021 rose by 40 percent in comparison with 2020. 

While input material prices are increasing sharply, the prices of finished products are not rising proportionally, which means businesses’ profits are shrinking and many of them are taking big losses. 

This is a vicious cycle: the price increases lead to domestic consumption decreases; as consumers tighten their purse strings, goods cannot be sold, which leads to higher inventories and debts, and therefore enterprises have to scale down production.

Regarding exports, some sectors with annual export turnover of billions of dollars have reported about inventories and the lack of orders for H2 2022. 

The trade associations of footwear, textile and garment, seafood processing, wood and forestry products all have reported that the current situation is difficult because  inflation rates are increasing in many countries and global purchasing power is decreasing, which explains why orders are on a decline. 

Some of their member companies have reported a high inventory level of 40 percent, while new orders for the time from August 2022 to Q1 2023 are lacking. 

Some businesses have reported that their partners have canceled orders and they may have to suspend production because of the order shortage.

Also, enterprises are facing difficulties in cash flow. The credit limit is running out, while the ‘credit valve’ has nearly been locked. As commercial banks have tightened lending, enterprises don’t have capital to run production and business. Enterprises buy products from each other and still owe money to each other as they don’t have cash to make payments.

Vu Vinh Phu, a respected economist, said those with the monthly income of VND5-6 million suffer the most. They have to cut expenses as essential prices are increasing sharply. As businesses have to scale down production, workers have lower incomes or even lose jobs.

Taxes and fees

Meanwhile, the support to businesses and people have been delivered in dribs and drabs. The 2 percent interest rate subsidy package, for instance, has been disbursed very slowly because of complex procedures. For many workers, the package of supporting workers to pay room rent is insignificant.

Economists pointed out that the high state budget revenue gives favorable conditions to help people and businesses overcome difficulties.

According to Ngo Tri Long, a price expert, the 2 percent VAT reduction, starting on February 1, 2022, has helped cut the prices of many products, but the reductions are insignificant. The prices of many products are much higher than the beginning of the year, so the 2 percent tax decrease cannot offset price increases. In other words, the 2 percent VAT tax cut cannot help stimulate purchasing power.

On August 8, the government decided to cut the preferential import tariff of non-lead engine petrol from 20 percent to 10 percent. However, the tariff cut doesn’t impact the selling prices of the product, because Vietnam mostly imports finished petroleum products from Southeast Asia (Singapore, Malaysia, Thailand, etc…) with a tariff of 8 percent, which is even lower than the 10 percent preferential tariff. As such, the preferential tax cut on petrol doesn’t help reduce petrol prices in the domestic market.

As for personal income tax, deductions for family circumstance of VND11 million for tax payers, and VND4.6 million for dependent family members are described as out of date. The deductions are not high enough to ensure the basic needs of workers, especially in the cities/provinces with high living costs such as Hanoi and HCM City.

Tran Thuy