Government agrees with MoF’s proposal on 2% VAT reduction

	MoF proposes to reduce by 2% VAT rate in 2023
	The Government remove obstacles in the implementation of VAT reduction by 8%

The Ministry of Finance reports to the Government for submission to the National Assembly a draft resolution on VAT reduction. Illustrative photo: H.Anh

On April 17, the Government Office sent a dispatch to the Minister of Finance on the plan to reduce taxes, fees and charges for 2023.

The Deputy Prime Minister asked the MoF to work with the Ministry of Justice and other relevant ministries and agencies to develop the draft resolution to submit to the competent authority, and report to the Government before April 25.

The Deputy Prime Minister requested the MoF to build regulations on the reduction of fees and charges in accordance with the Law on Promulgation of Legal Documents.

In the draft, the MoF cites the Law on VAT as saying that the VAT rate includes two rates of 5% and 10% (excluding the 0% rate applied to exported goods and services, those not subject to VAT). Tax payable = output VAT amount - input VAT amount. Goods and services purchased by business establishments are subject to tax rates of 10%, 5% or 0%.

Therefore, for goods and services subject to 5% VAT, the output VAT amount is basically less than the input VAT amount, so business establishments are often refunded the deductible input VAT amount. For goods and services subject to 10% VAT, business establishments must pay VAT (because the output VAT is higher than input VAT).

In order to stimulate consumption demand, recover and develop the economy, the National Assembly issued Resolution No. 43/2022/QH15 dated January 11, 2022 on fiscal and monetary policies to support the socio-economic recovery and development programme. The Government has issued Decree No. 15/2022/ND-CP dated January 28, 2022 providing tax exemption and reduction policies under to Resolution No. 43/2022/QH15 of the National Assembly.

The implementation showed that the total support package for VAT reduction in 2022 was worth about VND44 trillion, and the VAT reduction stimulated consumption demand, contributing to promoting production and business development.

However, during the implementation process, the tax payer and the tax authority faced difficulties when identifying goods and services that are not subject to tax reduction. Regulations on excluding some groups of goods and services as per Resolution No. 43/2022/QH15 have increased compliance costs for the taxpayer and the tax authority.

Therefore, the Ministry proposed a VAT reduction from 10% to 8% for a number of goods and services, along with a 20% cut in the percentage of goods for VAT calculation for business establishments (including business households and individuals) when issuing invoices for all goods and services subject to the 10% VAT in 2023.

The plan aims to achieve the target of stimulating consumption demand and be consistent with the current economic situation, thereby promoting production and business activities to restore and boost the economy as well as the state revenue. The policy should be applied until December 31.

It is estimated that the policy will result in a reduction of VND5.8 trillion per month for the State revenue, and about VND35 trillion in the last six months of this year.

To overcome and offset the impacts on the state revenue in the short term as well as ensure the initiative in managing state budget estimates, the Ministry will coordinate with relevant ministries, agencies and localities to focus on directing and implementing tax laws; reform and modernize the tax system, streamline administrative procedures; drastically manage the revenue collection, and implement solutions for revenue management, combating revenue loss, transfer pricing and tax evasion.