Production and business activities are still difficult, domestic purchasing power shows signs of slowing down... Therefore, it is necessary to continue reducing VAT by 20% in the first 6 months of 2025 for some groups of goods with a tax rate of 10%.
Both people and businesses want to continue reducing VAT in 2025 - Photo: QUANG DINH
That is the affirmation of the Ministry of Finance when soliciting comments on the proposal to develop a National Assembly resolution on reducing VAT by 20% (from 10% to 8%), following the direction in the resolution just issued by the Government.
However, according to many people and businesses, a 20% VAT reduction should be considered for the entire year of 2025, instead of just for 6 months, because the economic situation is still difficult and purchasing power has not improved much.
Should VAT be reduced for the whole year 2025?
Talking to us, many people and businesses highly appreciated the Government's proposal, saying that not only are businesses facing difficulties due to poor purchasing power, but the lives of many salaried workers are facing countless difficulties because their income has decreased sharply, while the prices of goods have increased.
However, many opinions suggest that VAT should be reduced by 20% for the whole year of 2025 to stimulate purchasing power, instead of only extending it until mid-2025 as proposed.
Ms. LTT (Cau Giay District, Hanoi) said that the prices of many essential goods and services have increased sharply, such as tuition fees and bus fares for students in Hanoi, which have increased from VND100,000 to VND140,000 per month. Even rice has increased to VND20,000 - 22,000 per kg, while three years ago it was only VND15,000... Meanwhile, the income of many salaried workers like her has decreased sharply compared to before the Covid-19 pandemic, with many places even seeing a 30 - 40% decrease in income.
"Many businesses are still facing difficulties due to reduced demand, many businesses have had to close, especially those selling goods and services... Therefore, extending the VAT reduction until the end of 2025 will not only help people have less difficulty but businesses will also benefit when purchasing power improves...", Ms. LTT said.
Also proposing to extend VAT reduction until the end of 2025 to stimulate consumption and promote domestic production and business activities, Mr. HMK, a business owner in Hai Phong, said that many countries are applying policies to stimulate domestic consumption to support people and businesses.
For example, at Korean supermarkets, foreign customers not only get VAT refunds but also receive shopping vouchers worth about 200,000 - 300,000 VND/day/person when purchasing domestic products in this country.
"Therefore, to promote domestic production development, extending the VAT reduction policy is necessary in the context of global purchasing power remaining very low, domestic consumption is expected to be the driving force to promote economic growth," Mr. HMK affirmed.
Source: Ministry of Finance - Graphics: Tuan Anh
Extending tax cuts, gains more than losses
Speaking with Tuoi Tre, Dr. Nguyen Ngoc Tu, a tax expert, suggested extending the VAT reduction until the end of 2025 because this policy has shown positive results when applied in recent years.
"As the Ministry of Finance noted, the VAT reduction policy in 2022 has contributed to stimulating increased domestic consumption, thereby causing total retail sales of goods and consumer service revenue in 2022 to increase by nearly 20% compared to 2021," Mr. Tu affirmed.
Meanwhile, according to Mr. Tu, tax reduction does not reduce budget revenue but on the contrary, increases budget revenue. In fact, by the end of the first 10 months of 2024, total budget revenue reached 1,654 trillion VND, equal to 97.2% of the annual estimate and an increase of 17.3% over the same period last year. This figure shows the significance of the State's support policy, including VAT reduction from 2022 to present.
"The 20% reduction in VAT helps make goods cheaper for consumers. For example, an item priced at VND1 million, when the VAT rate is 10%, the total amount to be paid is VND1,100,000. But thanks to the tax reduction to 8%, the amount that the buyer only has to pay for that item is VND1,080,000. With the surplus money thanks to the tax reduction, people buy more goods. And when consumption of goods and services is vibrant, production and business enterprises will increase revenue, thereby contributing more to the budget," Mr. Tu analyzed.
Another tax expert also said that in addition to extending the VAT reduction until the end of 2025, this policy should be applied to all items with a 10% tax rate, not excluding some groups such as real estate business, banking, etc.
"The 2% reduction in VAT from 2022 to now shows the effectiveness of the policy, so now we just need to implement it. Items with a 5% VAT rate will be raised to 8% and items with a 10% tax rate will be reduced to 8%" - this person suggested.
VAT reduction, total retail sales and service revenue increase sharply
According to information in the proposal to develop a National Assembly resolution on VAT reduction that is being consulted, the Ministry of Finance said that in 2022, the 2% VAT reduction policy supported businesses and people with a total of about VND 51,400 billion, contributing to stimulating increased domestic consumption, thereby increasing total retail sales of goods and consumer service revenue in 2022 by 19.8% compared to 2021.
In 2023, the 2% VAT reduction in the last 6 months of the year also supported businesses and people with a total of about 23,400 billion VND, helping total retail sales of goods and consumer service revenue increase by 9.6% compared to 2022. With this policy, the VAT reduction for the whole year is estimated at about 49,000 billion VND, but the budget revenue still achieved quite good results.
"The policy of reducing VAT by 2% on some groups of goods has stimulated consumer demand, contributed to promoting production and business development and creating more jobs for workers" - the Ministry of Finance assessed.
National Assembly Delegate Pham Van Thinh:
Need to study more policies to stimulate consumption
In the context of the world's overall demand still declining, the recovery of major trading partners is slow and there are still risks of disruptions to global supply chains and value chains, domestic aggregate consumption demand is considered an important driving force to promote economic growth.
Therefore, the proposal to continue reducing VAT by 2% for another 6 months of 2025 is necessary. However, in my opinion, the Government can assess the economic context and budget revenue and expenditure to consider reporting to the National Assembly to reduce VAT by 2% for the whole year of 2025 instead of 6 months as proposed.
Furthermore, continuing to reduce taxes throughout the year will help businesses and establishments to do their accounting more conveniently. In addition, the Government can study other policies to stimulate domestic consumption.
Although the VAT will be reduced by 2% in 2024, estimated at VND49,000 billion, the budget revenue will still achieve good results. The socio-economic situation in 2024 will be more positive month by month, and higher quarter by quarter. GDP growth in the first 9 months will reach 6.82%, and the whole year is estimated at 6.8 - 7%, higher than the target assigned by the National Assembly (6 - 6.5%), belonging to the group of countries with high growth rates.
Source: https://tuoitre.vn/giam-thue-vat-tang-kich-cau-tieu-dung-20241122083403771.htm
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