Vietnam's financial sector made important gains in 2023, contributing to the country's "silver lining" with GDP growth of 5.05% amidst the global complex economic picture, said Minister of Finance Ho Duc Phoc.
Despite the struggling economy, budget revenue was considered a bright spot for Vietnam in 2023. What is your take?
In 2023, the world's political, economic and social situation continued to be complicated, significantly affecting the economic recovery and growth of the country. However, the financial sector effectively carried out its assigned tasks.
Regarding state budget management, the sector implemented an expansive, flexible and focused fiscal policy, with support packages for exemption, reduction, and deferral of taxes, fees, charges, and land rents estimated at up to VND200 trillion ($8.19 billion). I think this was a particularly important mark, clearly demonstrating the positive and effective role of fiscal policy in stabilizing the macro economy, and promoting economic recovery and growth.
In addition, the Ministry of Finance has submitted to the government and National Assembly for approval a resolution on the application of the global minimum tax (GMT) in Vietnam from 2024. This shows Vietnam's proactiveness in the international playground, affirming the right to collect taxes on production and business activities in Vietnam's territory according to international regulations and domestic laws.
The estimated state budget revenue in 2023 exceeded the target by about 5%. Including tax exemptions and reductions, last year's budget revenue surpassed 9-10% of the estimate assigned by the National Assembly. Notably, both the central and local budgets exceeded the estimates. The economy faced many difficulties after the epidemic, and the resilience of businesses was limited, so many tax and fee exemption and reduction policies continued to be implemented to support businesses and people. I believe that the above results are extremely positive and a highlight of how we managed the state budget in 2023.
Controlling overspending and managing public debt were also a bright spot. The 2023 budget deficit was estimated at below 4% compared to the 4.42% allowed by the National Assembly. Public debt and government debt by the end of 2023 hit 37% and 34% of GDP, much lower than the ceiling levels of 60% and 50% set by the legislature. Debt structure was positive with domestic debt increasing and foreign debt gradually decreasing.
In addition, financial markets continued to be consolidated, with difficulties and obstacles promptly removed to develop healthily, openly and transparently.
Could you give your evaluations of the results of exemptions, reductions, and extensions of taxes, fees, charges and land rents? How have these support solutions impacted budget revenue over the past year?
Since 2020, the Ministry of Finance has been pushing competent authorities to approve and issue financial solutions with a total support value of about VND700 trillion ($28.66 billion). These solutions included extension, exemption and reduction of taxes, fees, charges, and land rents; exemption and reduction of corporate income tax, personal income tax, value added tax, import tax, and environmental protection tax; and a number of fees and charges to support businesses, people, and the economy.
This support ammounted to about VND129 trillion ($5.28 billion) in 2020, VND145 trillion ($5.94 billion) in 2021, VND233 trillion ($9.54 billion) in 2022, and VND200 trillion ($8.19 billion) in 2023.
State budget revenue was greatly affected as attempted to ensure budgets for regular spending, development investment, and especially social security, causing great challenges to balancing the books, so the implementation of the above support policies further demonstrates the Ministry of Finance's determination to always accompany and support businesses and people.
The National Assembly has passed a resolution on the state budget revenue estimate for 2024, in which the estimated domestic revenue from production and business activities will increase by 3.4% compared to the estimate for 2023. As the economy still faces difficulties, do you think this goal will put pressure on the financial industry and what can be done to achieve it?
In 2024 we will implement finance - state budget tasks amid a mixture of opportunities, advantages and disadvantages, with more difficulties than opportunities. Meanwhile, the tasks set for the financial sector are extremely heavy: estimated state budget revenue is VND1,700 trillion ($69.6 billion); estimated state budget expenditure is VND2,100 trillion ($86 billion); and the state budget deficit target is VND399.4 trillion ($16.35 billion), equivalent to about 3.6% of GDP.
The difficulty for 2024 is to use reasonable fiscal policy to both promote the economy and ensure macroeconomic stability, control inflation, and ensure national financial safety. Therefore, the level of easing needs to be carefully calculated to achieve these goals, in which macroeconomic stability and inflation control are still considered top priorities.
In that context, the major goal of the financial industry is to build and operate a proactive, flexible and focused fiscal policy. To realize this, we must regularly monitor and accurately forecast the world and domestic economic situation; continue to improve institutions and legal policies on state budget revenue, strengthen revenue management, and strive to complete assigned revenue estimates at the highest level to ensure resources to implement socio-economic development goals.
We will strictly manage state budget expenditures, and improve the efficiency of management, allocation, and use of the state budget; strive for higher public investment disbursement than last year; strictly control state budget overspending, public debt; ensure the stable and safe operation of the financial market and financial services; and strictly handle violations and promote fair competition among economic sectors.
At the same time, it is necessary to practically and effectively implement enterprise restructuring, equitization and divestment of state capital; substantially improve the business environment, reform administrative procedures, and enhance national competitiveness.
The Ministry of Finance has submitted to the government and National Assembly for approval a resolution on the GMT application. What benefits will Vietnam receive from implementing this resolution?
If Vietnam applies GMT rules, it will contribute to increasing state budget revenue through additional corporate income tax (CIT) from businesses that currently enjoy CIT incentives in Vietnam.
According to 2022 CIT data, there are about 122 foreign corporations investing in Vietnam affected by the GMT. If Vietnam applies the GMT from 2024 on companies investing in Vietnam, we can collect additional taxes estimated at over VND14.6 trillion ($598 million).
If Vietnam applies the Income Inclusion Rule (IIR) on Vietnamese enterprises investing abroad with consolidated revenue of at least €750 million (subject to the GMT) from this year, the country can collect nearly VND73 billion ($3 billion) from additional CIT.