Arguing that extending the 2% VAT reduction until mid-2024 will be difficult to clearly stimulate demand, delegates proposed reducing this tax for the whole of next year and applying it to all products.
The above suggestion was raised by most National Assembly delegates when discussing the consideration of extending the 2% VAT reduction period until June 2024, on the afternoon of November 20.
According to Mr. Nguyen Quang Huan, Chairman of the Board of Directors of Halcom Vietnam Joint Stock Company, reducing value-added tax (VAT) will help reduce costs and stimulate demand. "This policy should be applied in the long term, that is, the whole year of 2024 instead of just 6 months as proposed by the Government," he said.
Sharing the same view, Mr. Nguyen Duy Thanh, Vice Chairman of the Ca Mau Province Business Association, proposed that the National Assembly consider reducing VAT to 8% for the whole year next year, to promote the policy's effectiveness more clearly. At the same time, he wants this tax to be reduced for all goods and services because "discrimination against tax reduction subjects can invisibly create inequality in the market".
Explaining this aspect more clearly, Mr. Duong Khac Mai, Deputy Head of the Dak Nong Provincial Delegation, said that the socio-economic situation has changed, many industries and fields that were not previously subject to tax reduction are now facing difficulties, such as real estate and securities. Therefore, he said that it is necessary to re-evaluate the actual situation so that the policies can be more appropriate.
Regarding the time of applying VAT reduction in the first 6 months of 2024, the Finance and Budget Committee, when examining, also stated that implementing the policy in 6 months would be difficult to achieve the target, not ensuring proactiveness and stability. Therefore, the examining agency proposed a 2% VAT reduction for the whole year of 2024 and the Government should have solutions to improve the quality of policy making and perfect the law.
Mr. Nguyen Quang Huan, Chairman of the Board of Directors of Halcom Vietnam Joint Stock Company, spoke on the afternoon of November 20. Photo: National Assembly Media
At the time of the Covid-19 outbreak, this tax reduction policy was introduced to stimulate demand and support people, but it also caused the budget to decrease. According to the Government's report, the 2024 budget is expected to decrease by VND 25,000 billion if the reduction is for 6 months and is calculated based on a GDP growth scenario of 6-6.5%. Therefore, in the long term, Mr. Huan said that it is necessary to assess the impact more thoroughly and comprehensively, such as how much tax reduction will help increase GDP.
"Taxes cannot be reduced forever because reduced budget revenue will affect socio-economic and macro-economic development," Mr. Huan stated his opinion.
Ms. Nguyen Thi Viet Nga, Deputy Head of the Hai Duong Province Delegation, also said that there is no basis to confirm that the 2% VAT reduction solution has created jobs for workers during the recent pandemic. On the other hand, the Government has not provided convincing data on the recovery momentum of total retail sales of goods and services thanks to this tax reduction in recent times.
Ms. Nga suggested that the Government clearly analyze the impact of the policy on macroeconomic stability, promoting economic growth recovery and affecting local budgets.
Explaining at the end of the discussion, Finance Minister Ho Duc Phoc said the 2% VAT reduction will be extended until the middle of next year to reduce pressure on the budget.
"Reducing VAT is just one measure and only has a short-term effect. Therefore, to create conditions for businesses to overcome difficulties, reducing taxes for 6 months or 1 year, combined with other tax and stimulus solutions, will achieve the economic growth target," he said.
For example, the management agency will study to amend the special consumption tax in 2024 and personal income tax in 2025, with the tax rate trend always increasing.
He added that in addition to the central budget losing VND25,000 billion in revenue if the 2% VAT reduction is extended until mid-2024, some localities will also be affected. Of which, Hanoi will lose nearly VND3,470 billion, Ho Chi Minh City nearly VND4,000 billion, and Binh Duong more than VND1,150 billion. Some other localities will also lose VND350-600 billion in revenue.
"The recently passed National Assembly budget resolution only reduces VAT by 2% in the first 6 months of 2024, but if this policy is applied for 1 year, the central budget will decrease by 50,000 billion VND," Minister Ho Duc Phoc shared.
According to the program, the National Assembly will decide on a 2% VAT reduction on November 29 when passing the resolution of the 6th session.
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