Customers buy goods at Dong Ba Marketplace, Hue City. Associations believe that the extension of the VAT cuts would boost domestic consumption in this tough time. — VNA/VNS Photo Mai Trang

Many associations are appealing to the government for the value-added tax (VAT) cuts of 2 per cent to be extended until late 2023.

The Food and Foodstuff Association (FFA) of HCM City described favourable policies initiated by the government, especially the VAT cuts, as a lifebelt that was keeping firms afloat during the pandemic.

As the tax cuts were slated to expire by late 2022, the association called for the expiration date to be pushed back to December 31, 2023, to give firms more time to recover.

FFA President Ly Kim Chi said the situation was getting worse in the last months of 2022 as many firms were bending under the pressure of raising interest rates, mounting fuel costs, and falling customer orders. Those firms need the extended VAT cuts to make it through this tough time.

The Vietnam Beer-Alcohol-Beverage Association (VBA) shares Chi's view, saying that beverage firms were having a hard time dealing with the global energy crisis, growing interest rates and high inflation.

Meanwhile, VAT cuts have proved to be a highly-effective fiscal tool to support recovery and boost consumption during the pandemic. The association thus called for the tool to be used for another year to ease their woes.

Phan Thi Thanh Xuan, a researcher at the University of Economics and Law of HCM City, was concerned that the total retail sale of consumer goods and services in the city was dropping steadily in Q4 shortly after reaching its pre-pandemic levels.

More specifically, the researcher revealed that current customer purchasing power was falling short of levels in 2019 by 20 per cent. Weakening demand could be observed in key industries including food, construction materials, and educational goods.

In face of the situation, she urged the Government to extend the VAT cuts to late 2023 to give a bigger push to domestic demand. She said the road to recovery would be tougher should such an extension be not approved.

Over the year, the VAT cuts were widely regarded among firms as a timely policy that gave fresh impetus to their post-pandemic recovery, stablised prices, and stimulated domestic demand.

Thanks to the cuts, Viet Nam's annual consumer price index grew by just 3.15 per cent in 2022 despite mounting fuel prices, well under the target set by the National Assembly. — VNS