Proposal to continue reducing VAT by 2%

According to Deputy Prime Minister and Minister of Finance Ho Duc Phoc, the most important thing is to find a way to make businesses stronger and richer. Solving difficulties for businesses does not only rely on taxes, but also on policy mechanisms, investment procedures, credit support, etc.

On the afternoon of November 28, the National Assembly discussed in the hall the draft Resolution of the National Assembly on further reducing 2% of value added tax (VAT) in the first 6 months of 2025.

Proposal to continue reducing VAT by 2% until the end of June 2025

The Government proposes to reduce the VAT rate by 2%, applicable to groups of goods and services currently subject to a tax rate of 10% (to 8%), applicable from January 1 to June 30, 2025.

The groups of goods that are not subject to reduction include: 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.

According to the Government, the implementation of the policy of further reducing VAT by 2% aims to stimulate consumption, in line with the current economic context, thereby contributing to promoting the recovery and growth of production and business activities to contribute back to the budget as well as the economy.

The 2% reduction in VAT will affect the prices of goods and services, thus benefiting people, while businesses will reduce costs, lower product prices, and increase competitiveness and consumption of goods.

Examining this content, Chairman of the National Assembly's Finance and Budget Committee Le Quang Manh agreed with the necessity of issuing a decree, but some opinions disagreed with continuing to apply the VAT reduction policy.

The National Assembly discussed in the hall the draft Resolution of the National Assembly on further reducing 2% of value added tax (VAT) in the first 6 months of 2025.

The reason for the VAT reduction policy was issued and implemented from 2022 in the context of businesses and people facing many difficulties due to the Covid-19 pandemic. This should only be a temporary solution for a certain period of time to support people and businesses.

Now that the pandemic has ended for a long time, preferential tax policies issued to support businesses and people to overcome difficulties after the pandemic need to be reviewed to narrow the scope of application and gradually stabilize the implementation of tax policies.

In addition, the reduction in VAT that has not been taken into account in the 2025 state budget estimate may impact the assurance of revenue estimates and budget deficit in 2025.

The budget will have a deficit of 26,000 billion VND.

Speaking at the meeting, delegate Pham Van Hoa (Dong Thap delegation) agreed with the 2% VAT reduction, but he said that it should not be “reduced piecemeal” every 6 months. Because last year, when the Government proposed a 6-month VAT reduction, there were opinions asking why not ask for a 1-year reduction?

“Does the Government guarantee that after 6 months it will not submit to the National Assembly a further 2% VAT reduction? I suggest the Government review so that it does not have to submit multiple times. At the same time, it is necessary to review why some businesses are eligible for a reduction and others are not to ensure fairness,” said Mr. Hoa.

Delegate Pham Van Hoa (Dong Thap delegation)

Explaining at the National Assembly, Deputy Prime Minister and Minister of Finance Ho Duc Phoc said that he had not yet had time to assess the impact of the policy on businesses because the resolution was drafted quite quickly when the National Assembly session began.

Mr. Ho Duc Phoc added: “Our VAT rate is too low compared to the world. China and India's VAT rate is 17%, Israel's is 17%, Europe's is over 20%, Denmark, Norway's is 25%, France's is 20%... That means our VAT rate is less than half.”

In addition, the tax reduction also conflicts with the VAT law and the 2025 budget estimate that has just been approved by the National Assembly. If VAT revenue is reduced by 2%, the 6-month budget will decrease by 26,000 billion VND, so provinces, ministries and sectors must make efforts to ensure the annual budget estimate.

Therefore, the Deputy Prime Minister said that the Government only proposed to reduce VAT for 6 months. In addition, the difficulties in 2025 will not be fully foreseen, especially in exports. Major export markets may be affected, raising import taxes will make goods very difficult.

"Even if divided equally among 1 million businesses, it would only reduce about 30 million VND/business, which is not much," said the Deputy Prime Minister, adding that this is an encouragement for businesses to overcome difficulties.

The Deputy Prime Minister shared: “We are also sad to have to discuss the tax reduction situation”. Mr. Ho Duc Phoc emphasized that the most important thing is to find a way to make businesses richer and stronger, so that we do not have to borrow from foreign countries anymore. Solving difficulties for businesses does not only rely on taxes, but must be policies, investment procedures, obstacles in production and business, land, licensing, credit support…”.

Source: https://phunuvietnam.vn/de-xuat-tiep-tuc-giam-thue-vat-2-20241128180050636.htm