VAT proposed to reduce in the first half of 2024

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The Ministry of Finance said that the VAT reduction in the first half of 2024 to support people is necessary.

VAT reduction in the first half of 2024 is necessary

According to the Ministry of Finance, the Covid-19 pandemic has hit hard all aspects of life, the economy, and society. In the period 2020-2023, the Government has provided big supportive policies. From 2020 to the current date, the total amount of reduced, exempted, and deferred taxes, fees, charges, and land rent is VND700 trillion. In 2023 alone, the amount is about VND196 trillion. As of September, the amount is VND152.2 trillion.

However, after a long period of resistance to the COVID-19 pandemic, domestic enterprises are in the process of recovery, so production and business activities continue to face difficulties. The number of firms exiting the market or temporarily exiting the market increased by 19.9% compared to the first nine months of 2022. In the first 9 months of 2023, export turnover decreased by 8.2% and import turnover dropped 13.8% year-on-year. The state revenue is estimated at VND1,223.8 billion, meeting 75.5% of the estimate.

In 2023, facing the difficulties of the economy, the National Assembly continues to implement the VAT reduction policy under Resolution No. 43/2022/QH15 from July 1 to December 31, 2023, and Resolution No. 101/2023/QH15 dated June 24, 2023, of the National Assembly on the 5th Session, 15th National Assembly. The solutions have facilitated enterprises and reduced cost, increased benefits, and the ability to stimulate demand.

During the three months of implementation (July, August, and September), these policies have assisted about VND11.7 trillion people, contributing to reducing prices of goods, and services, thereby promoting production and business and creating more jobs for workers, stimulating consumer demand and promoting production and business development.

The implementation of these policies has contributed to economic growth. Therefore, the GDP in the second quarter and the third quarter was higher than the first quarter.

The total retail sales of consumer goods and services increased by 7.1% in July, 7.6% in August and 7.5% in September.

To respond to socio-economic developments and consider and calculate in line with the reality, and to deploy effectively supportive solutions on taxes, fees and charges, and land rent issued in 2023 and propose some policies for 2024; based on the assessment of the results achieved by the 2% VAT reduction under Resolution No. 101/2023/QH15, the Ministry of Finance affirms that the VAT reduction in the first six months of 2024 to support businesses and people is necessary.

About VND 25 trillion of state revenue is estimated to decline

According to the Ministry of Finance, the VAT reduction for groups of 10% VAT- goods and services has been implemented effectively in 2022 and 2023. Therefore, the Ministry of Finance has reported to the Prime Minister to reduce VAT as prescribed in Resolution No. 43/2022/QH15 and Resolution No. 101/2023/QH15.

Specifically, the Ministry suggested a VAT reduction from 10% to 8% for a number of goods and services: telecommunications, information technology, financial operation, banking, securities, insurance, real estate business, metal production, and production of prefabricated metal products, mining industry (excluding coal mining), production of coke, refined petroleum, production of chemicals and chemical products, goods and services subject to special consumption tax.

The effective date is from January 1 to June 30, 2024. The ministry has proposed to the Prime Minister to assign the National Assembly Standing Committee to reduce VAT after June 30, 2024, if the economic situation, businesses, and people still face difficulties.

According to the Ministry of Finance, the 2% VAT reduction in the first half of 2024 is expected to reduce state revenue by about VND25 trillion.

The data is calculated based on the expected reduction in domestic revenue in the second half months of 2023 (average monthly at about VND2,550 billion). The GDP growth is assumed at 6-6.5 %, and the revenue in 2024 is estimated at 5-7%.

The Ministry of Finance will coordinate with relevant ministries, sectors, and localities to effectively direct and implement Tax Law; continue to reform and modernize the tax system and simplify tax administrative procedures. At the same time, the Ministry will drastically control the revenue collection and effective solutions to manage revenue and prevent revenue loss, transfer pricing, and tax evasion.

Earlier, at the third-quarter press conference of the Ministry of Finance, Mr. Truong Ba Tuan, Deputy Director of the Tax Policy Department (under the Ministry of Finance) said that in the context of a difficult economy due to the impact of the pandemic and the world economic and political situation, the Ministry of Finance has proactively advised competent authorities and issued policies on reducing fees, charges, taxes,... to support businesses in overcoming difficulties, including the 2% VAT reduction policy.

In 2023, VND196 trillion is expected to support people and businesses. Of which, the deferred-tax amount is VND121,000 billion, and the reduced and exempted amount of taxes, fees, charges, and land rent is about VND75,000 billion, including a 2% VAT reduction for some groups of goods and services. These policies have been effective and received high appreciation from people and businesses.

“Based on the Government's meeting on the socio-economic situation in the nine months of 2023, the Prime Minister assigned the Ministry of Finance to review two contents, including a reduction in Environmental Protection Tax for petroleum products in 2024; submit to the National Assembly the possibility of continuing to propose a 2% VAT reduction in 2024,” said Tuan.