A proposal to continue the 2% value-added tax (VAT) reduction policy for certain groups of goods and services that currently have a 10% VAT rate for the last 6 months of 2024.
In Report No. 177/TTr-CP sent to the National Assembly regarding the results of the 2% VAT reduction in accordance with Resolution No. 110/2023/QH15 dated November 29, 2023, of the National Assembly on the 6th Session of the 15th National Assembly, the Government reported that the COVID-19 pandemic has had severe and long-lasting consequences, affecting all aspects of life, the economy, and society. Along with climate change, natural disasters, and floods, it has caused significant challenges for the Vietnamese economy and society, with most sectors and industries being severely impacted.
During the 2020-2023 period, fiscal policy solutions to alleviate difficulties for businesses and production were implemented, with the total value of solutions for exemption, reduction, extension of taxes, fees, charges, and land rents (corporate income tax, personal income tax, VAT, special consumption tax, import tax, environmental protection tax, fees, charges, and land rents) amounting to approximately VND 700 trillion and was expected to be.
It is noteworthy that solutions enacted and implemented since the beginning of 2024 total approximately VND 68 trillion. Among these, the 2% VAT reduction under Resolution No. 110/2023/QH15 from January 1, 2024, to June 30, 2024, was approximately VND 25 trillion; the reduction of environmental protection tax on gasoline, oil, and lubricants in 2024 under Resolution No. 42/2023/UBTVQH15 dated December 18, 2023, by the National Assembly Standing Committee was approximately VND 42.5 trillion; and the reduction of fees and charges was approximately VND 100 billion.
According to the Government, focused and coordinated implementation of fiscal policy solutions in recent times has had a positive impact on supporting businesses and people to stabilize production, business, and life, contributing to macroeconomic stability and creating favorable conditions for promoting economic recovery and growth.
However, after a prolonged period of battling the COVID-19 pandemic, domestic businesses are in the process of recovery, and production and business activities continue to face difficulties. At the 6th Session, the National Assembly adopted Resolution No. 103/2023/QH15 on the Socio-Economic Development Plan for 2024, with a target GDP growth rate of 6 – 6.5%. In the coming period, the global and regional situation will continue to evolve rapidly, be complex and difficult to predict; the recovery of major trading partners will be slow; and the risks of disruptions to global supply and value chains, among others, will persist.
Domestically, although many industries and sectors continue to recover and show positive prospects, many policies and solutions to remove difficulties and obstacles have and are having positive effects, but challenges outweigh opportunities and advantages. Domestic aggregate demand is considered a crucial driver for economic growth. Therefore, fiscal policy solutions to stimulate domestic aggregate demand are still needed.
To respond promptly to socio-economic developments, the Government believes that it is necessary to resolutely and effectively implement support solutions for taxes, fees, charges, and land rents issued in 2023 and to study and propose solutions for taxes, fees, charges, and land rents for 2024, such as: continuing to consider a 2% VAT reduction; extending VAT, corporate income tax, special consumption tax, and personal income tax; reducing some fees, charges, and land rents as implemented in 2023 to continue removing difficulties and supporting production and business activities.
Based on an assessment of the results achieved by the 2% VAT reduction solution under Resolution No. 110/2023/QH15, the Government has submitted to the National Assembly for consideration and approval to continue implementing the policy of a 2% reduction in VAT rates for certain groups of goods and services that are currently subject to a 10% VAT rate during the last 6 months of 2024 (from July 1, 2024, to December 31, 2024) and to assign the Government to organize and implement it.
It is estimated that the application of the 2% VAT rate reduction policy for the last 6 months of 2024 will reduce revenue by approximately VND 24 trillion (approximately VND 4 trillion per month; of which the reduction at the domestic stage is estimated to be VND 2.5 trillion per month and the reduction at the import stage is approximately VND 1.5 trillion per month).
In the first three months of 2024, VAT revenue reduced by approximately VND 11,488 billion under Resolution No. 110/2023/QH15. Except for February, which had the Tet holiday, VAT revenue at the import and domestic stages averaged approximately VND 1.5 trillion per month and VND 2.5 trillion per month, respectively. Thus, in the first half of 2024, the estimated revenue reduction is approximately VND 23,488 billion. If the VAT reduction policy is continued for the last 6 months of the year, the total revenue reduction for 2024 is estimated to be approximately VND 47,488 billion.
Regarding the implementation method, the Government proposes including the continuation of the 2% VAT rate reduction policy for the groups of goods and services specified in Point a, Section 1.1, Article 3 of Resolution No. 43/2022/QH15 of the National Assembly on fiscal and monetary policies to support the socio-economic recovery and development program from July 1, 2024, to December 31, 2024, in the Resolution of the National Assembly on the 7th Session, 15th National Assembly (similar to that approved by the National Assembly in Resolution No. 101/2023/QH15 on the 5th Session and Resolution No. 110/2023/QH15 on the 6th Session).
At a press conference to announce the latest Asian Development Outlook (ADO) report by the Asian Development Bank (ADB), Mr. Nguyen Ba Hung, ADB’s Lead Economist, noted: Monetary policy, interest rate cuts have limited room. With limited monetary policy space, fiscal spending and investment will be key to growth in 2024. Therefore, instead of monetary policy, ADB experts recommend additional growth-stimulating policies, such as fiscal policy. Experts also recommend continuing to extend the VAT reduction period for essential domestic goods and services to increase consumer spending.
