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Friday, June 14, 2024

NA Standing Committee turns down blanket VAT cut

The Saigon Times

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HCMC – The Government’s proposal for lowering the value added tax (VAT) from 10% to 8% has been endorsed to go before the National Assembly (NA) at its next sitting, but the NA Standing Committee has declined a blanket tax reduction for all goods and services.

If the NA issues a new resolution approving the proposal, households and businesses would enjoy a 2% VAT cut from July 1 to December 31.

However, the VAT reduction would only apply to certain goods and services, similar to the NA’s Resolution 43/2022/QH15 issued last year, said Nguyen Duc Hai, vice chairman of the National Assembly, at the NA Standing Committee session today, May 13.

NA Chairman Vuong Dinh Hue backed the view, saying the forthcoming VAT reduction would be the same as that applied in Resolution 43.

At the NA Standing Committee session, which ended today after four days and a half, Minister of Finance Ho Duc Phoc sought approval for the proposed VAT cut for all goods and services by two percentage points that are subject to a 10% VAT.

This is an extension from the scheme on fiscal and monetary policies applied last year, which cut the VAT by two percentage points to support households and businesses as they were negatively affected by the Covid-19 pandemic.

The newly proposed VAT cut, which would benefit goods and services subject to special consumption tax, and sectors such as banking, securities, insurance and real estate, would lead state budget revenue to fall by VND5.8 trillion per month, or around VND35 trillion by the end of 2023, Phoc said.

But the Government does not make clear why the above goods, services and sectors should be eligible for the proposed 2% VAT cut.

In theory, the VAT reduction would boost consumption, thus resulting in higher budget revenue which would make up for lower VAT collections. However, Hue said, businesses and households are still struggling with difficulties, so it would be tough to step up consumption.

He told the Government to have a plan to create new sources of revenue to offset the expected VAT revenue fall.

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