According to Minister of Finance Ho Duc Phoc, the government has proposed reducing the VAT by 2 percent, from 10 percent currently to 8 percent, applied to goods and services subject to this tax.
Under the proposal, Vietnam will expand the business fields of goods and services enjoying the VAT cut applied in 2022 according to National Assembly Resolution 43 on fiscal and monetary policies to support economic recovery.
In addition, the government proposed a 20 percent reduction of the percentage used to calculate VAT applied to business establishments (including business households and individuals) when issuing invoices for all kinds of goods and services subject to 10 percent VAT.
MOF estimated that with the VAT cut, the state budget would lose VND5.8 trillion in tax collection every month. If the new policy is applied in the last six months of the year, the loss of revenue would total VND35 trillion.
Nguyen Van Chi, Deputy Chair of the National Assembly’s Finance and Budget Committee, said most of the committee’s members agreed on the need for a resolution on cutting VAT to support the production and business sector and people who have faced difficulties after Covid-19.
This will be significant if noting that economic growth began a downward trend in the fourth quarter of 2022, especially in the first months of 2023.
VAT cut would reduce state revenue
However, the Finance and Budget committee asked the government to give a clearer plan on offsetting the decrease in revenue of VND35 trillion caused by the tax cut.
The revenue decrease was not taken into account when the policy package of Resolution 43 was designed and the 2023 budget estimates were approved by the National Assembly.
According to Chi, the VAT cut will cause more adverse effects to the budget in 2023. Meanwhile, tax collection in 2023 will be difficult this year, the government said.
Chi noted that the government did not clearly specify why it has proposed VAT cut to more business fields, including banking, securities, insurance, real estate trade, mining, telecommunications and IT.
Chi said the majority of members of the committee disagreed with the expansion of business fields for the VAT reduction application, because the tax reduction will affect the state budget collection.