return icon

VAT reduction helps economic recovery

Reducing the VAT (value added tax) by 2 percent has been the most practical solution to stimulate consumption and production.

The General Department of Taxation (GDT) has gained ‘excellent and comprehensive’ achievements with the state budget collection of VND1.692 trillion, or 20 percent higher than estimates, and VND78 trillion higher than the figure in 2022 as reported to the National Assembly.

The budget collections are higher than estimates because this has happened regularly in recent years. The noteworthy thing is that the proportion of revenue from domestic sources has been increasing, reaching 85 percent, which shows the strength of the economy.

However, the mobilization rate to the state budget is high, at 18 percent of GDP (gross domestic product), higher than the targeted 15.2 percent of GDP. The figure is high at a time when enterprises, the public and the economy have been facing difficulties over the last three years.

Vietnam has applied a reasonable fiscal policy to help people and enterprises ease difficulties because of the pandemic, with VND233.5 trillion total value of taxes, land rent, fees and charges reduced in a campaign which is the largest one in the history of the financial sector.

However, the amount includes VND135 trillion of tax payment delay. In other words, enterprises and people will still have to pay the taxes.

Enterprises and people can only enjoy a tax cut and reduction of VND98.5 trillion.

The most considerable support is the 2 percent VAT reduction policy, under which VND51.4 trillion has been cut or reduced to stimulate production and consumption. Analysts say that this was the fastest, most direct and effective support package among the state-initiated packages so far.

Policymakers once were worried that the VAT reduction from 10 percent to 8 percent would lead to a decrease in tax collections to the state budget in the short term.

However, this did not occur. Figures show positive influences of the VAT reduction to the economy. All enterprises, the public and the state benefited from the policy.

The 2 percent VAT cut was seen as a direct support to enterprises and people in difficult times, demonstrated in goods and service prices, which helped curb inflation, stimulate consumption and encourage enterprises to accelerate production and business.

The VAT cut led to an input cost decrease, which helped enterprises recover and scale up business. The tax cut policy was implemented without having to undergo a series of administrative procedures and satisfy strict conditions. The reduction was applied to the majority of goods.

After nearly one year of implementation, there have been no complaints from enterprises or people.

In short, cutting the VAT has had a very positive impact on consumption and production in the long term. The support helped businesses maintain production and expand business, help create more jobs, reduce the unemployment rate, and quickly recover the economy in the post-pandemic period.

This stimulates people to spend more money, and when the consumption increases, the production will increase. This, finally, helps the state budget increase the revenue by 4.3 percent.

However, the 2 percent VAT cut policy will be valid until the end of 2022 only. Analysts believe that the policy should be renewed for one more year. Enterprises have begun recovering the production, but they remain ‘fragile’. They are just like the people who have just recovered from illness, and they need a light exercise regime, not hard work.

That is why the National Private Economic Development Research Board (Board IV) has proposed extending the VAT cut policy and some other policies which showed their effects during the pandemic, including the delay in applying new land tax rates, and restructuring debts.

Lan Anh


Vietnam's bond market remains quiet this year

The scale of debt in the corporate bond market is less than 15 per cent of GDP.

Organ trafficking in Vietnam driven by high demand, low rate of donation: experts

A conference on organ donation registration and the prevention of human organ and tissue trafficking was held on Monday.

VCCI proposes allowing businesses to set fuel retail prices

The Vietnam Chamber of Commerce and Industry (VCCI) has written to the Government suggesting fuel retail prices be decided by businesses based on supply and demand to prevent fuel shortages.


Vietnam puts children at centre of development policies, strategies: Ambassador

Gov’t issues action plan to realize Hanoi’s development vision until 2045

The Government has issued an action plan to realize Politburo’s resolution on the objectives for Hanoi’s development until 2030, with a vision to 2045.

Commercial sidewalk use may be charged by HCMC authorities

HCMC is planning to allow the paid use of sidewalks for commercial purposes such as vending goods or parking if these business activities leave a space of at least 1.5 meters wide for pedestrians.

CAAV advises caution when buying air tickets

The Civil Aviation Authority of Viet Nam (CAAV) has received feedback on the fact that passengers have to buy air tickets higher than the specified prices on domestic routes, especially during the peak of the Lunar New Year (Tet).

Prime Minister leaves Hanoi for official visits to Singapore, Brunei

Prime Minister Pham Minh Chinh, his spouse and a high-ranking delegation of Vietnam left Hanoi at noon on February 8 for official visits to Singapore and Brunei from February 8-11.

US war veteran wishing to return wartime diary to Vietnamese family

Pater Mathews, a US war veteran, has emailed relevant agencies of Ha Tinh province, central Vietnam, expressing his desire to fly to Vietnam and return a Vietnamese martyr’s diary he came across decades ago to the martyr’s family.


January payment transactions via national public service portal valued at 11.8 mln USD

Vietnam needs new products, services to reach tourism targets

To realise the targets of attracting 110 million tourists and earning some 650 trillion VND (27.5 billion USD) in revenue this year, Vietnam is recommended to develop more products and services to offer new experiences to visitors.

PM Chinh’s Singapore visit expected to advance bilateral trade ties

Prime Minister Pham Minh Chinh’s Singapore visit from February 8-10 aims to affirm the determination to elevate the bilateral economic ties to a new height in the context of many free trade agreement (FTAs) coming into force.

VN to force retailers to generate e-invoices from cash registers

When the technical infrastructure and capacity were upgraded to meet the demand, the regulations about issuing e-invoices from cash registers must then be made compulsory together with the introduction of punishments for violations.

Festivals back in cities and provinces across the country

After a three-year hiatus due to the COVID-19 pandemic, festivals are back in many cities and provinces across the country, attracting thousands of tourists.

600-year-old bell: national treasure of Vietnam

A bell at the Roi pagoda in the central province of Ha Tinh has been recognized as a national treasure.