Vietnam gov’t mulls VAT cut extension to support economic growth

The Vietnamese government is seeking to extend a two-percentage-point cut to value added tax (VAT) by another six months to the end of June 2024 in a move to stimulate domestic demand and support economic growth.

The government has assigned the Ministry of Finance to make a proposal on the cut to the parliament for approval.

In June, the parliament agreed to extend the VAT reduction till the end of this year, applicable to a wide range of goods and services that are subject to a 10% rate. This cut does not apply to goods and services in the telecom, real estate, securities, insurance, banking and mining sectors.

The VAT incentive will cost the national budget an estimated $1 billion in the second half of this year.

On the back of a hard blow from Covid-19, the Vietnamese parliament agreed to cut VAT in the final months of 2021 and has extended it since then.

As global demand fell, Vietnamese exports suffered, so the Vietnamese government is making efforts to stimulate domestic demand, revive the stalled real estate market, and push disbursement of public investment to reach GDP growth of 6 this year.

Shantanu Chakraborty, country director of the Asian Development Bank (ADB) for Vietnam, suggested Thursday that the Vietnamese government boost public investment, loosen further fiscal policy, and encourage domestic consumption.