Proposal to reduce value added tax on all goods and services

Illustration photo: Vietnam+

Authorized by the Prime Minister, Minister of Finance Ho Duc Phoc has just signed a document to the National Assembly proposing to reduce value-added tax (VAT) until the end of 2023 for all goods and services.

The Government's report stated that in recent times and especially in 2022, many support solutions on taxes, fees and charges to reduce the contribution obligations of businesses and people have been implemented with great support value and wide support scope, contributing to positive results in the recovery and development of the socio-economy as well as the activities of businesses and people, thereby contributing back to the state budget.

However, the implementation of the above support solutions also has a certain impact on the implementation of the state budget.

Although the state budget revenue results in 2022 are positive, from the end of 2022 and especially the first months of 2023, there has been a downward trend.

Revenue in the first quarter of 2023 is estimated at VND 411,800 billion, equal to 30.9% of the estimate, up 5.4% over the same period in 2022. However, state budget revenue in March decreased compared to February and February decreased compared to January.

Besides, revenue from import-export activities in the first quarter was equal to 26.9% of the estimate, down 16.4% over the same period in 2022.

The global and domestic situation is forecast to continue to develop more complicatedly; difficulties and challenges for the economy and business operations are increasing, creating great pressure on macroeconomic stability, affecting the recovery and development of many industries and fields.

Therefore, more solutions are needed to support businesses, people and the economy to continue to maintain the recovery momentum.

The report also stated that with the experience of many countries in the past, to support businesses and people, countries often apply packages of many policy measures, focusing on supporting businesses facing difficulties in cash flow and capital in the most affected industries through monetary policies such as lowering lending interest rates and promoting lending activities and extending bank debt.

In addition, there are combined solutions to reduce the payment burden including cutting business costs (reducing rent, land rent, service fees), extending tax payment deadlines; increasing spending on social security, providing cash support to people; boosting public investment in key areas such as infrastructure, technology, etc.

In recent times, Vietnam has also implemented many support solutions to extend tax payment deadlines for corporate income tax, personal income tax, value added tax, special consumption tax and land rent, reduce taxes and land rents; exempt and reduce fees and charges with positive results.

In order to promptly respond to developments in the socio-economic situation, and at the same time consider and calculate appropriately according to actual conditions, in addition to the solutions that have been and are being implemented for 2023, the Government said that it is necessary to continue to reduce value-added tax as applied in 2022 to support businesses and people.

Therefore, in 2023, the Government proposes to reduce the VAT rate by 2% for all goods and services subject to the 10% tax rate (to 8%); reduce the % rate for calculating VAT by 20% for business establishments (including business households and individual businesses) when issuing invoices for all goods and services subject to the 10% VAT rate.

Assessing the impact of the draft resolution on the state budget, people and businesses, the Government said that the expected reduction in state budget revenue is about 5,800 billion VND/month, if applied in the last 6 months of the year, it is equivalent to about 35,000 billion VND.

To overcome and compensate for the short-term impacts on state budget revenue as well as ensure proactive management of state budget estimates, the Government will direct the Ministry of Finance to coordinate with relevant ministries, branches and localities to focus on directing the implementation and effective implementation of tax laws; continue to reform and modernize the tax system, simplify tax administrative procedures; at the same time, resolutely manage state budget revenue, focus on timely and effective implementation of groups of solutions for revenue management, combating revenue loss, transfer pricing and tax evasion.

The report also stated that reducing value-added tax will contribute to reducing the cost of goods and services, thereby promoting production and business and creating more jobs for workers, contributing to stabilizing the macro economy and economic recovery in 2023.

For the people, this is the group that will directly benefit from this policy. Reducing value added tax on goods and services subject to a 10% value added tax rate will contribute to reducing selling prices, thereby directly reducing people's costs in consuming goods and services serving people's lives.

Enterprises producing and trading goods and providing services subject to value-added tax at a tax rate of 10% will benefit when the policy is issued.

Reducing value added tax will help reduce production costs and product prices, thereby helping businesses increase their resilience and expand production and business.

In addition, the policy contents through review of relevant international treaties to which Vietnam is a member, the policy contents proposed in the draft resolution are all ensured to be consistent with Vietnam's international commitments and not contrary to the commitments in international treaties to which Vietnam has participated and is a member.

Regarding the application period, from the date this policy is issued until December 31, 2023.

According to VNA