The Vietnamese Government has agreed in principle with the Ministry of Finance’s proposal of reducing value-added tax (VAT) from 10 per cent to 8 per cent which would be submitted to the National Assembly for approval as early as possible.

In the document sent to the Minister of Finance on Monday, Deputy Prime Minister Le Minh Khai asked the Ministry of Finance to coordinate with relevant ministries and agencies to complete the documents for the approval of a resolution about tax and fee reductions in 2023.

The resolution must be issued before April 25, Khai said.

The Ministry of Finance opts for the option of reducing VAT from 10 per cent to 8 per cent for all goods and services which were currently subject to a VAT rate of 10 per cent.

It was estimated that the VAT reduction would cause the State budget revenue to shrink by VND35 trillion in the second half of this year, or on average VND5.8 trillion per month.

The VAT reduction aimed to stimulate consumption demand in line with the current economic context, thereby, promoting production and business to recover and contribute to the State budget and the economy.

The reduction would be applied till the end of this year, the ministry said.

Previously, the ministry also raised another option for VAT reduction, which said that 2 per cent reduction would be applied for goods and services which were currently subject to 10 per cent VAT, except for some which enjoyed the reduction in 2022 following the National Assembly’s Resolution 43 about fiscal and monetary policies to support socio-economic recovery and development programme.

The exception would cause confusion and push up compliance costs in implementation, which was not suitable in the context that enterprises were struggling to maintain operations and find orders.

In 2022, the VAT reductions totalled VND44 trillion following Resolution No 43/2022/QH15 dated January 10, 2022. — VNS