The Government has just submitted to the National Assembly for consideration and permission to continue implementing the policy of reducing the value added tax rate (VAT) by 2 percent for a group of goods and services that are currently suffering the 10 percent VAT rate in six last months of the year.
According to the Ministry of Finance, if the policy is approved, it is expected that budget revenue for the whole year 2024 will decrease by more than VND47,000 billion (US$1,858,851,892). This is not a small number but in the present context of the country’s economy, continued VAT reduction is a necessary policy to support businesses and more broadly, maintain macroeconomic stability and stimulate growth.
According to the Ministry of Planning and Investment, in the first quarter of 2024, the number of businesses withdrawing from the market was nearly 74,000 businesses, an increase of 22.8 percent over the same period last year. This is a very worrying number because businesses are the long-term source of revenue for the state budget and the driving force of economic growth. Firms also provide employment to thousands of workers and their families live on salaries given by firms; however, currently, unfavorable economic factors have a bad impact on firms.
Forecasts were made that the world and regional situation remains unstable, rapidly evolving, and complex, with risks of disruption to the supply chain and global value chain, which will continue to adversely affect the ability to Vietnam's exports. Domestically, the economy and businesses continue to face many difficulties.
In that context, domestic consumption demand is considered an important driving force to promote economic growth. Therefore, it is necessary to continue to have financial policy solutions to promote this aggregate demand. Tax and fee reductions are expected to bring about better outcomes than other solutions such as monetary policy solutions.
In fact, the implementation of the 2-percent VAT reduction policy has clearly shown the positive and multi-dimensional impact of this policy on businesses, people and the economy. This policy not only gives financial support to people and businesses but also demonstrates the Government's companionship with businesses.
The 2-percent VAT reduction policy is a trade-off matter between loss and gain. But on this side, the gain is greater than the loss because, in addition to maintaining macroeconomic stability, tax reduction will help the economy recover and grow; in other words, people's lives will improve more, and businesses can develop. When businesses grow, state budget revenue will also increase stably and sustainably.
