The policy of "VAT reduction" and the story of "stimulating consumption"

Pursuant to Decree No. 94 of the Government, dated December 28, 2023, stipulating the policy of reducing value-added tax (VAT) according to Resolution No. 110, dated November 29, 2013 of the National Assembly, thereby continuing to reduce VAT to 8% from January 1, 2024 to June 30, 2024.

The policy of reducing value added tax (VAT) from 10% to 8% has received positive feedback from the people and society. Many opinions say that, in the current economic context, reducing VAT contributes to reducing product prices, thereby stimulating production, creating jobs for workers, contributing to stimulating consumer demand, and reducing the risk of inflation.

Many types of goods will have VAT reduced from the beginning of 2024. Photo: Dinh Hoa

In our country, personal and household consumption has always been of interest to the Party and the State, creating favorable conditions to promote rapid and sustainable development. However, while people's "consumption demand" is at a very low level due to concerns about the economic recession in recent times, it has led to people "hoarding" valuable assets and saving on spending. As a result, no matter how "cheap" the goods are, the sales and output of some commercial enterprises have not increased. In reality, people's ability to "pay" is also low, and this purchasing power is still quite far from the market potential. Therefore, from the beginning of 2024, especially as the Lunar New Year is approaching, reducing VAT and stimulating consumption is possible and necessary.

The therapy of “reducing VAT and stimulating consumption” is essentially the proactive use of the “Hand of the State” to positively impact the “total supply” and “total demand” of society in a unified, organized and purposeful manner, in the direction of encouraging investment and expanding the scale of consumption, activating and increasing the driving force for economic development in the context of declining confidence and economic development drivers associated with difficulties in capital sources and consumption markets of enterprises, especially the private economic sector... However, reducing VAT may have an impact in stimulating consumption, thereby increasing total demand for the economy, promoting production activities of enterprises. However, the issue that needs to be considered is the endurance of the state budget when VAT revenue, which has accounted for a relatively high proportion in the budget revenue structure for many years, will decrease significantly. Especially in the medium term, if this "therapy" is prolonged too long and the stimulus package is used ineffectively, it can increase the accumulation of goods-money imbalance and seriously violate the law of monetary circulation.

A typical story, in 2023, Binh Thuan was honored to host and successfully organize the National Tourism Year: "Binh Thuan - Green Convergence", which is considered a tourism stimulus program, while spreading to other areas in the province. The tourism stimulus story includes many synchronous solutions, from strengthening communication, promoting images to activities of checking and controlling prices of tourism goods and services. At the same time, introduce products at the market and display, introduce start-up products, OCOP products, successfully organize traditional festivals associated with folk cultural activities so that tourists can participate in experiencing and exploring local culture... Although reducing costs, the province and the tourism industry always focus on improving the quality of tourism products, services, service quality, ensuring security and order, environmental sanitation, meeting and serving the needs of tourists well, to attract tourists to return to Binh Thuan many times.

In order to implement this "therapy" throughout, all levels, sectors and enterprises in Binh Thuan province have been implementing many solutions to stimulate consumption, and now continue to implement many more important consumption stimulus programs. In particular, special attention is paid to the national concentrated promotion program and market stabilization, jointly signing "price retention" contracts, especially for price stabilization goods and essential goods, together reducing profits to help customers save maximum spending, thereby preparing their "wallets" to enter the peak shopping season with the Lunar New Year 2024.

In short, “tax reduction” and “consumption stimulus” have more positive impacts than negative ones, especially stimulus packages that have certain historical significance in the process of developing and managing the country’s and local socio-economics, especially in emergency and special situations… However, the actual implementation requires “caution and alertness”, avoiding abuse and prolongation as well as strengthening information work, inspection and combining other synchronous solutions to promote positive impacts, neutralize and prevent negative impacts, contributing to stabilizing and developing the macro and micro economy in a sustainable direction.

The policy of "reducing VAT" and the story of "stimulating consumption", whether the solutions are macro or micro, short-term or long-term, making economic activities and social life vibrant again is still a necessary concern, because the economic context is still "gloomy" and people will hardly be happy.

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