Regarding the idea of extending the VAT reduction period, Minister Ho Duc Phoc said that this is an immediate measure and a reduction for 6 months "is appropriate" and balanced with the budget.
On the afternoon of June 1, the National Assembly discussed the 2% reduction in value added tax (VAT). Mr. Tran Chi Cuong, Deputy Head of the Da Nang City delegation, proposed extending the 2% VAT reduction period until the end of 2024. According to him, this is to avoid the policy being applied too short (according to the Government's proposal, it is 6 months), making it difficult for localities to proactively calculate and balance the reduction in revenue and expenditure or vice versa, ensuring the preparation of estimates and the balance of revenue and expenditure for the following year.
Ms. Mai Thi Phuong Hoa, Vice Chairwoman of the Judiciary Committee, also said that reducing VAT by 2% until the end of 2023 is too short. She suggested extending it until the end of 2025, or at least until the end of 2024, so that the policy has enough time to take effect. Ms. Hoa suggested that the Ministry of Finance direct tax authorities to promptly guide VAT refund applications. Meanwhile, the State Bank is studying policies that go beyond precedent, such as requiring commercial banks to reduce lending interest rates to below 9%, and changing lending conditions to be flexible and feasible to support businesses.
Explaining later, Finance Minister Ho Duc Phoc said that the Government's proposal on the subjects and the 6-month duration had been reviewed by the Finance and Budget Committee and commented on by the National Assembly Standing Committee.
"The Government's proposal to reduce VAT is suitable for balancing the budget and only has the effect of stimulating demand and solving immediate difficulties," the Minister of Finance informed.
Finance Minister Ho Duc Phoc explains at the National Assembly on the afternoon of June 1. Photo: Hoang Phong
Presented to the National Assembly this time, the Government proposed to reduce the VAT rate to 8%, but not to apply to groups of goods such as telecommunications, information technology, finance, banking, insurance securities, real estate business, metals, prefabricated metal products, mining products, refined petroleum, chemical products and items subject to special consumption tax.
At today’s discussion, some delegates proposed to expand the scope of this tax reduction. Referring to the difficulties of the domestic automobile manufacturing and assembly industry, Ms. Nguyen Thi Viet Nga, Deputy Head of the Hai Duong Province Delegation, proposed to expand the areas eligible for VAT reduction, applying a tax rate of 8% to automobiles (including vehicles with less than 24 seats).
Ms. Nga cited feedback from automobile businesses, saying that the industry is facing large inventories, many product maintenance costs, and declining revenue. This has resulted in paralyzed cash flow, leading to an imbalance in revenue and expenditure, and ineffective business operations. In the first four months of this year, the number of cars sold domestically was 22,409, the lowest in four years.
"Cars are a high-tax item with many fees, such as VAT, import tax, special consumption tax, registration fee, license plate fee... so if VAT is reduced by 2%, the total tax collected from other taxes and fees on a car will exceed the reduced VAT amount," said Ms. Nga.
In response to this proposal, Minister Ho Duc Phoc said that cars are not among the goods subject to tax reduction under Resolution 43, so "they are not included, and tax reduction is only for essential goods".
This tax reduction will be included in the resolution of the session, and the National Assembly is expected to vote on it on June 24.
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