Financial policy positively impacts every corner of the economy

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Dr. Le Duy Binh, CEO of Economica Vietnam

Sir, how do you evaluate the solutions to support businesses and the market that have been and are being implemented?

Since the beginning of the year until now, in the context of the economy in general and businesses, in particular, facing many difficulties, the Government and the Finance sector have actively deployed many fiscal policy solutions to support businesses directly. Firstly, reduce or extend the land rent payment deadline for businesses. This policy directly impacts many businesses using land across the country. Second, reducing and extending the payment time for some taxes, such as corporate and personal income tax, and regulating environmental protection tax rates on gasoline, oil, and lubricants have actively and directly supported the company's liquidity. The entire business community, to production and business establishments nationwide. Most recently, VAT reduction has directly impacted final buyers in the economy, and the number of people benefiting from this policy is very large. People and businesses, as the final consumers in the economy, benefit from the VAT reduction policy.

It can be said that financial policy has impacted a large number of businesses and people nationwide and positively affected many corners of the economy. In addition to these outstanding measures, the financial industry also implemented other measures, such as reducing charges in some areas to reduce the cost burden on businesses. Thus, it can be seen that fiscal policy has played a pivotal role in supporting the economy in recent times.

According to your observations, what supportive policies have a great impact and penetration on the market and businesses in the current context?

In this year's economic context, the room for monetary policy to directly impact businesses and the economy is not as large as in previous years. Besides, monetary policy often has a longer lag than fiscal policy. Therefore, in addition to contributing to sharing the burden of monetary policy, fiscal policy will have a more direct, osmotic impact on businesses and the entire economy in general in terms of this year's economic context.

Important policies such as tax reduction and land rent reduction have greatly supported businesses, thereby reducing business costs. The State budget has directly shared the difficulties for businesses, supporting businesses by reducing land rental costs for businesses and reducing tax debt, thereby directly affecting the bottom line of enterprises. In addition, the amount of money that businesses are extended to pay taxes and land rent is also relatively large, and this amount of money has the meaning of directly supporting business liquidity, reducing businesses' difficulties in cash flow, especially in the context of many businesses facing many difficulties in orders and markets recently.

According to the Ministry of Finance, financial policies to support businesses in 2023 related to reducing, extending, and exempting tax charges are about 200 trillion VND, equivalent to more than 8 billion USD. In the current difficult economic context, this is timely support for businesses and has great penetration because it comes directly to businesses.

According to calculations, in 2023, taxes, fees, charges and land rent will be exempted or reduced by about 75 trillion VND. The tax reduced from the decision to reduce the value-added tax rate by 2% is about 24 trillion VND. Preliminary calculations from these two numbers show that the state budget will spend about 6% of the total state budget balance in 2023 to support businesses and people. This number says a lot about the State's spirit of harmonizing benefits and sharing risks with the business community and people when the economy faces many difficulties.

Notably, the procedures for businesses to enjoy support policies are simple and can be implemented quickly and effectively through the electronic tax system. Easy and convenient access to support measures is a strong point highly appreciated by businesses and people.

As for VAT, the total amount of VAT reduced by more than 20,000 billion VND will support people's consumption activities. It contributes to maintaining a sustainable growth rate in people's final consumption - an important component of the economy's aggregate demand. At the same time, reducing VAT also supports stimulating the production of goods for consumption and contributes to controlling consumer prices.

Supporting and removing difficulties for people and businesses and promoting production and business are still the top goals of the Government. To achieve this goal, the Ministry of Finance has determined that from now until the end of the year, it will continue to apply proactive and flexible fiscal policy solutions to support the economy and remove difficulties for people and businesses. In your opinion, how will the orientation of applying proactive and flexible fiscal policies create conditions for management agencies to advise and promulgate policies to support the economy?

I think this policy orientation is consistent with practical requirements. Message of proactively flexible fiscal policy appropriate to Vietnam's current economic context. This orientation will help fiscal policy play a larger and more active role than before. The current landscape has more aggregate demand problems than supply problems, therefore. There needs to be a greater direct impact from fiscal policies to support the economic recovery. In addition, reducing the financial burden so that businesses can overcome difficulties, maintain operations and be ready to return to production and business when aggregate demand recovers is highly recommended.

After over half a year, state budget revenue and expenditure data show greater room for fiscal policy to play a more active role. This orientation will open up stronger, higher-level proposals to support businesses, consumers, and economic growth in the last 6 months of the year, with projections for the first and last 6 months of 2024.

What recommendations do you have for management agencies so that support solutions continue to penetrate more effectively into businesses and markets?

The recent implementation of fiscal policies to support businesses and people has been carried out effectively and without many large-scale difficulties and problems. The financial industry has implemented and continuously learned from experience over the past 3 years. Fast and effective implementation has helped fiscal policies penetrate directly to businesses and consumers. Most businesses and consumers feel the effect when the policy is issued and implemented.

Regarding recommendations, as I said above, some policies can be considered, researched, calculated and prepared for implementation sooner to bring greater benefits to businesses, people and the whole community.

In addition, in the spirit of being proactive and flexible, fiscal policy needs to anticipate appropriate fiscal measures for the first 6 months of the year and the last 6 months of 2024 based on domestic and international economic developments. That proactive and flexible spirit will help fiscal policies coordinate smoothly with monetary policies and industry policies so that the economy soon returns to a fast and sustainable growth trajectory.