Timely reprieve: A shopper in a supermarket in Hanoi, Vietnam. The reduction in VAT is forecast to reduce state revenue by US$4.69bil over the time it is put in place. — AP
HANOI: The government has proposed a 2% reduction in the value-added tax (VAT) for goods and services currently taxed at 10%, lowering the rate to 8%.
The proposal, which recommends maintaining the VAT reduction until Dec 31, 2026, was presented by Finance Minister Nguyen Van Thang during the ongoing National Assembly session.
The VAT reduction will not apply to sectors including telecommunications, financial services, banking, insurance, securities, real estate, metal products, mining (excluding coal) and items subject to special consumption tax (except for petrol), according to the proposal.
Additionally, the government has proposed adding petrol, washing machines, and microwave ovens to the list of goods eligible for the 2% VAT reduction.
Despite petrol being subject to a special consumption tax and oil being a refined petroleum product, the government has proposed applying the 2% VAT reduction to these items.
This move comes in recognition of the significant role both petrol and oil play in the economy and daily life.
According to the proposal, fuel prices directly influence production costs, consumer prices, and overall macroeconomic stability.
Finance Minister Nguyen Van Thang said that the reduction will contribute to economic stability despite potential short-term revenue losses.
He said the move would encourage business expansion, create jobs, and ultimately result in long-term economic benefits for the country.
The Finance Ministry has projected that the reduction will lead to a decrease in state revenue by approximately 121.74 trillion dong or about US$4.69bil over the proposed period.
This includes an estimated 39.54 trillion dong in the second half of this year and 82.2 trillion dong next year.
The policy is expected to lower the price of goods and services, thereby supporting consumer spending, stimulating consumption, and promoting business and production activities.
This, in turn, is anticipated to create jobs, stabilise the economy, and drive economic growth.
For consumers, the 2% VAT reduction will help reduce daily living and consumption costs.
Meanwhile, businesses stand to benefit from lower product costs, improved competitiveness, expanded markets for consumption and production, and increased job opportunities.
Phan Van Mai, chairman of the National Assembly Committee for Economic and Financial Affairs, said that a majority of National Assembly deputies support the government’s proposal to expand VAT incentives. — Viet Nam News/ANN
