Cheap items are normally sold at round prices to avoid odd numbers, which can be a nuisance for buyers paying in cash, but the VAT cuts of 2.0 per cent could bring back the inconvenience.

That was the comment made by the Vietnam Chamber of Commerce and Industry (VCCI) on the draft Decree on VAT Cuts by the Ministry of Finance (MoF).

The draft decree has been formulated as a follow-up legal document to the National Assembly's Resolution on VAT Cuts that took effect between July 1 to December 31, 2023.

VCCI said the tax policy could make life harder at the cash register since many producers would have to change their posted prices to odd numbers. For instance, an item of VND5,000 would have a new price tag of VND4,900 after the cuts, causing inconvenience to both buyers and cashiers.

Because of that, the chamber called for an additional article to the decree, under which certain producers would be exempt from adjusting their listed prices as required by the original decree.

VCCI also said the classification of goods and services according to tax status under Decree No 15 is so obscure that many producers have no clue about whether their products would be eligible for the VAT cuts or not.

The confusion could lead to a situation where many suppliers and purchasers are unable to reach a deal because of tax-related disagreements. Even tax agencies themselves, VCCI said, were having a hard time interpreting the decree.

"Bad officials could exploit the legal obscurity to lead firms on a merry dance," said VCCI.

The chamber also said a list of items had been published as an appendix to the draft decree. The list comprises items being assigned HS codes and items being marked with asterisks.

The decree stipulates that those asterisk-marked items will be assigned HS codes in a separate customs law.

VCCI said such stipulation had left importers scratching their heads because they have no idea whether their HS-code-assigned imports will be regulated by the decree or the customs law.

VCCI accordingly called for a revision to align the appendix with the customs law and remove from it all the asterisk-marked items to clear up the confusion.

Article 2.2 of the decree stipulates that "ministries and provincial authorities shall direct their subordinate agencies to disseminate information about the VAT cuts and conduct frequent inspection and supervision to ensure consumers be aware of and benefit from the tax policy".

VCCI believed that the article, with such wording, could lead to a possible interpretation that ministries and provincial authorities will keep a close watch on companies to ensure they cut their product prices by an amount proportional to the VAT cuts.

VCCI said the forced price cuts are against free market principles because in a free market, nobody is forced to do anything, and transactions are entered into voluntarily. On such a ground, VCCI called for the removal of Article 2.2 from the decree. — VNS