Examining the continued implementation of the policy of reducing VAT by 2%, the Finance and Budget Committee expressed its agreement, but noted: Some opinions in this Committee still have concerns about the Government's explanation when proposing to reduce VAT in the last 6 months of 2023.
The assessment of the implementation of the VAT reduction policy in 2022 as a basis for continuing to propose the issuance of the VAT reduction policy as stated in the Government's Impact Assessment Report No. 226/BC-CP may not be truly consistent with reality.
The Government believes that the VAT reduction solution under Resolution No. 43/2022/QH15 has indirectly stimulated increased domestic consumption, with total retail sales of goods and consumer service revenue in 2022 increasing by 19.8% over the previous year, contributing to stabilizing the macro economy with many bright spots in economic development indicators in 2022.
However, purchasing power and consumption in the current period are different from the context of 2022. In 2022, people's purchasing power and consumption have exploded and grown strongly after a period of being suppressed by the pandemic. At this stage, both people and businesses have been and are facing many difficulties.
Therefore, some opinions in the Finance and Budget Committee believe that the VAT reduction policy in the second half of 2023 is unlikely to have the effect of stimulating demand and promoting growth as in 2022. Accordingly, it is recommended that stimulus measures in 2023 focus on removing bottlenecks to increase disbursement and promote the effectiveness of public investment expenditure in the economic recovery package rather than continuing policies to reduce budget revenue.
There are also opinions that the 2% VAT reduction policy under Resolution No. 43/2022/QH15 will expire from December 31, 2022. From the beginning of 2023, the 10% tax rate has been applied to commodity groups according to the provisions of the VAT Law. At the end of 2022, many associations and localities have requested to continue to extend Resolution No. 43/2022/QH15.
If this solution is continued to be implemented from the beginning of January 2023, it will create more favorable conditions for the production and business sector. The Government's proposal to reduce VAT from July 1, 2023 is relatively late and the tax reduction is not implemented continuously, so the policy does not have much effect on businesses.
"The disruption in policy implementation also leads to other limitations and costs in management and implementation, complexity in handling transitions for businesses and affects input VAT deductions," the Finance and Budget Committee shared.
The majority of opinions in the Committee agreed that the VAT reduction policy will be applied from July 1, 2023 to December 31, 2023.
However, some opinions say that implementing the policy in the last 6 months of 2023 may not be enough time for the policy to take effect, making it difficult for the policy to achieve its set goals. Therefore, it is recommended to consider extending the policy application period compared to the Government's proposal to ensure stability, proactive implementation and enough time for the policy to take effect.
Extending beyond Tet will stimulate demand better
Talking to PV.VietNamNet, many businesses and associations also said that it is necessary to recalculate the application cycle.
Mr. Nguyen Chanh Phuong, Vice President of the Handicraft and Wood Processing Association of Ho Chi Minh City (Hawa) assessed that the 2% VAT reduction is very good, but it needs to be implemented sooner.
According to him, from October and November 2022, Associations and large enterprises have proposed this issue and are ready to reduce VAT by 2% at that time.
"We have missed out on stimulating demand at two high consumption times, Lunar New Year 2023 and the long holidays of April 30 and May 1," said Vice President Hawa, adding that if the proposal to reduce VAT by 2% is approved, the more reasonable cycle would be from September 1, 2023 to March 1, 2024, covering the entire Lunar New Year consumption season in 2024.
According to him, there may be regulations that tax adjustments must be made on a semi-annual basis for the fiscal year, but a reasonable VAT reduction cycle that serves the production and business activities of enterprises is a bold decision that needs to be considered. Demand should be stimulated at a time when people are focused on shopping activities.
Mr. Phuong gave an example, in some open economies, the authorities let businesses proactively arrange tax reduction cycles to suit their business lines. Some consumer goods industries focus on Tet, while others focus on other occasions. Accounting is up to the businesses, they manage that cycle themselves, and the tax authorities monitor it based on the total cycle time.
Sharing the same view, Chairman of the Ho Chi Minh City Business Association, Mr. Nguyen Ngoc Hoa, said that the 2% VAT reduction cycle should be extended to increase the spread of the policy. The policy is issued late, it takes time to penetrate into product costs and goods prices. If possible, the policy of reducing VAT from 10% to 8% should be extended beyond the Lunar New Year 2024, at which time domestic consumption demand will increase.
In addition, management agencies also need to consider other taxes that can be exempted or reduced during this period, such as reducing registration tax. The economy is difficult but there are still groups of customers who are eligible to buy houses and cars, so they need to be stimulated in spending.
Mr. Nguyen Van Khanh, Vice President of the Ho Chi Minh City Leather and Footwear Association, also said that this policy will partly stimulate consumer demand, but the application cycle needs to be longer, and if it is only until the end of the year, it is too short.
The Government proposes to continue implementing the policy of reducing VAT by 2% as prescribed in Resolution No. 43/2022/QH15 dated January 11, 2022 of the National Assembly on fiscal and monetary policies to support the Socio-Economic Recovery and Development Program. Specifically: Reduce 2% of value added tax rate, applied to groups of goods and services currently subject to a tax rate of 10% (to 8%), except for the following groups of goods and services: 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. |
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