The Government proposes to reduce 2% value added tax until the end of 2024

On June 13, continuing the 34th session, the National Assembly Standing Committee gave opinions on the draft Resolution of the National Assembly on reducing value added tax (VAT).

Estimated budget revenue reduction of about 24,000 billion

According to the Government 's proposal, in the period of 2022 - 2023 and the first 6 months of 2024, the National Assembly has resolved to reduce 2% value added tax on groups of goods and services currently applying a tax rate of 10% (down to 8%), except for some groups of goods and services as prescribed.

This has contributed to stimulating consumption, in line with the economic context at the time of policy issuance, thereby promoting production and business activities.

The National Assembly Standing Committee meets to give opinions on reducing 2% VAT

Now, the Government continues to submit to the National Assembly for consideration and permission to extend the implementation period of the 2% value-added tax reduction policy until the end of 2024 (from July 1 to December 31).

The subjects of goods and services with tax reduction are the same as before, except for the following groups: telecommunications, information technology, financial activities, banking, securities, insurance, real estate business, metals, prefabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products, goods and services subject to special consumption tax.

The government estimates that a 2% reduction in value-added tax in the last 6 months of 2024 will reduce budget revenue by an estimated VND24,000 billion. In return, this policy will stimulate production and promote business activities, thereby contributing to generating additional revenue for the budget.

People benefit from reduced costs of goods and services. Businesses also reduce production costs, lower product prices, increase competitiveness, thereby expanding production, creating more jobs, etc.

Purchasing power is down, is reducing VAT effective?

In its review report, the Finance and Budget Committee said that the standing committee currently has two views. The first is agreement with the Government's proposal, the second is disagreement.

The reduction in value added tax is expected to contribute to stimulating consumption and production and business.

According to the second viewpoint, total retail sales of goods and consumer service revenue during previous periods of applying the value-added tax reduction policy have gradually decreased over time.

Specifically, in 2022 it will increase by 19.8%, in 2023 it will increase by 9.6%, and in the first quarter of 2024 it will increase by 8.2% (if excluding price factors, it will only increase by 5.1%, lower than the GDP growth rate).

This shows that, although value added tax has been reduced, it has not been effective in stimulating consumption because people's purchasing power and domestic consumption capacity have decreased significantly.

Reducing value added tax in the context of people's current low purchasing power will also have difficulty promoting the production and business situation of enterprises. Reducing value added tax reduces input costs of enterprises by 2% but output revenue also decreases by 2%.

Not to mention, from July 1, 2024, salary reform will be implemented, so a huge amount of resources will be needed for investment. Therefore, increasing budget revenue in 2024 and the following years is a requirement to implement salary reform and other investment and essential spending tasks.

Ensuring stability and vision when issuing policies

According to the audit report, the Standing Committee of the Finance and Budget Committee agreed with the Government's proposal to continue reducing 2% of value added tax from July 1 to December 31.

However, this policy has been applied since 2022, then the Government submitted it to the National Assembly for consideration, allowing it to be extended for the last 6 months of 2023 and the first 6 months of 2024. Up to now, the Government continues to propose extending it until the end of 2024.

The above reality leads to a lack of stability, predictability and vision in policy issuance and implementation, affecting the initiative of enterprises in production and business planning...

In addition, the draft Law on Value Added Tax (amended) is being submitted by the Government to the National Assembly for consideration and comments at the 7th session and will be considered and approved at the 8th session.

To move towards stability and predictability of the value-added tax policy system, the auditing agency recommends that the Government ensure the termination of the value-added tax reduction policy as stated in this report, and not to extend it any further.

Clarifying problems and creating conditions for taxpayers

The Finance and Budget Committee also mentioned the report of the Vietnam Federation of Commerce and Industry, reflecting on the difficulties many businesses encounter when applying the policy of reducing value-added tax, mainly stemming from the classification of which goods are subject to a tax rate of 10% and which goods are reduced to 8%.

The auditing agency requested the Government to clarify solutions to handle the above-mentioned problems in case the National Assembly allows continued application in the last 6 months of 2024, ensuring the goal is easy to implement and convenient for taxpayers.

There are also suggestions to re-evaluate the scope of subjects eligible for value-added tax reduction, especially for goods that have encountered difficulties in recent implementation, in order to narrow the scope of exclusion to resolve practical shortcomings.

Source: https://thanhnien.vn/chinh-phu-de-xuat-giam-2-thue-gia-tri-gia-tang-den-het-nam-2024-18524061311461986.htm