The Standing Committee of the National Assembly, Vietnam's legislative body, has disagreed with the government's proposal to reduce value added tax (VAT) for the banking, securities, real estate, and insurance sectors.
At a working session on Saturday, the committee said VAT should be cut from 10% to 8%, but not applicable to the four sectors, like what was done in 2022.
The government had proposed a VAT reduction from 10% to 8% for all goods and services, effective until the end of 2023, to help businesses recover from the pandemic.
In addition, business establishments, including households and individuals, will enjoy a 20% cut in the percentage of goods for VAT calculation when issuing invoices for all goods and services subject to this tax, Minister of Finance Ho Duc Phoc said while presenting the proposal.
The Ministry of Finance estimates budget losses of VND5.8 trillion ($247 million) per month and VND35 trillion ($1.49 billion) in the last six months of this year if the tax is cut.
Nguyen Van Chi, vice chairperson of the National Assembly's (NA) Finance and Budget Committee, said that her committee does not agree with a 2-percentage-point VAT reduction for all goods and services.
The VAT reduction should be the same as last year under the NA’s Resolution 43 dated January 11, 2022 which stated that the securities, real estate, banking, and insurance sectors are not included in the list of beneficiaries to a 2-percentage-point VAT cut.
“This approach would result in a reduction of approximately VND9 trillion ($383.6 million) in budget losses as compared to the option of easing the tax for all goods and services,” Chi said.
Speaking at the event, NA Chairman Vuong Dinh Hue said that the tax reduction should be applied to specific goods and services as stated in Resolution 43, as it was carefully evaluated and is conducive to the government's policy implementation. The policy would be effective from July 1 to December 31, 2023.
He noted that the tax reduction should not lead to a decrease in revenue and increase budget overspending this year in order to ensure the national financial safety.
"Lowering VAT is to stimulate consumer demand and benefit people and businesses, but it should not reduce the budget. If the tax reduction affects budget targets, the National Assembly will not agree," he opined.
Echoing the top legislator’s view, chairman of the NA’s Economic Committee Vu Hong Thanh asked for careful consideration of VAT reduction for all goods and services, expressing concerns over budget deficit.
In conclusion, the NA Standing Committee agreed to include the VAT reduction proposal in the legislature’s law and ordinance building program for 2023, which will be submitted to the legislative body for consideration during its fifth session, scheduled to open on May 22.