Apply 2% VAT cut to all goods, services: Vietnam commerce chamber

The Vietnam Chamber of Commerce and Industry (VCCI) has proposed the Ministry of Finance cut the value added tax (VAT) by two percentage points for all goods and services amid prolonged economic stagnation.

The VCCI’s suggestion was made after the government last week had agreed to the finance ministry’s proposal to extend the 2% cut to the VAT for multiple goods and services that are now subject to a 10% rate by another six months, throughout June 2024.

Such a cut does not apply to goods and services in the telecom, real estate, securities, insurance, banking, chemical and mining sectors. The proposal is pending parliament endorsement.

The 2% VAT reduction has been in place since early 2022, aiming to boost domestic consumption and aid economic recovery from the Covid-19 pandemic amid anemic export orders.

Although the government has issued decrees to guide the implementation of the reduction, the VCCI argued that many businesses find it confusing to determine whether the cut is applicable to their goods and services or not.

Even tax and customs authorities, under the finance ministry, cannot give them clear answers. In many cases, companies cannot reach an agreement on how to apply the VAT cut, the VCCI noted.

If the scope of the 2% VAT cut remains unchanged, it is estimated to cost the state budget VND25 trillion ($1.02 billion) in the first half of next year. The cost was around VND44 trillion ($1.8 billion) last year and VND11.7 trillion ($477 million) in the July-September quarter this year.