No VAT reduction for telecom, banking, securities, real estate, insurance sectors

The Vietnamese government on Wednesday proposed to the legislature a 2-percentage-point reduction in value added tax (VAT) for goods and services, except for those in the telecom, real estate, securities, insurance and banking sectors.

The VAT cut from 10% to 8%, like what was done in 2022, will be effective until the end of 2023, said the cabinet.

Under the proposal, presented by Finance Minister Ho Duc Phoc, the VAT reduction will not apply to commodity groups such as telecommunications, information technology, finance, banking, securities, insurance, real estate business, metals, and products from prefabricated metals, mining products, refined oil, chemical products, and items subject to special consumption tax.

The move aims to stimulate consumption demand, and promote production and business recovery, he stressed.

Commenting on the report, Chairman of the National Assembly’s Finance-Budget Committee Le Quang Manh said most of the committee members proposed applying the VAT cut to all groups of commodities as they are all facing difficulties.

The committee, however, suggested the government evaluate the impact of the reduction more precisely to meet set targets, he said, adding that some proposed raising the hike to 4 percentage points.

Most of the lawmakers also agreed with the duration from July 1 to the end of this year, while some others held that it should be extended to ensure the stability and efficiency of the policy, Manh noted.

The government estimated a budget loss of VND24 trillion ($1.02 billion) with the proposed option, a reduction of approximately VND9 trillion ($383.6 million) as compared to the option of easing the tax for all goods and services.

The committee asked the cabinet to give more details about the option as well as solutions to offset the revenue reduction and the ability to balance this year's budget, he added.

On the sidelines of the legislative body's meeting, many delegates said they agree with the government's proposal to stimulate consumption in the context of reduced aggregate demand and economic challenges.

Le Thanh Van, representing the southernmost province of Ca Mau, said that this tax should be reduced at a higher level, 3-5 percentage points, to help businesses reduce costs and increase sales, thus spurring growth. “When businesses earn more profits, they will pay more taxes.”

Tran Van Lam, a standing member of the National Assembly's Finance-Budget Committee, argued that a 2-percentage-point VAT reduction as applied in 2022 is appropriate as not all goods and services need to be encouraged for consumption.