VAT cut boosts economy

As the tax cut makes the prices of many products lower, buyers flocked to supermarkets to hunt for bargains. — Photo tuoitre.vn

HÀ NỘI — The reduction of value-added tax (VAT) from 10 per cent to 8 per cent will help stimulate various sectors in the economy.

Nguyễn Ngô Anh Tuấn, dry food manager of Lotte Mart Việt Nam, noted the tax cut was a timely policy that eased the financial strain felt by consumers amid the pandemic.

The average tax incentives provided for a single household is estimated at several hundred thousand of đồng per month.

Accordingly, total monthly tax incentives could amount to tens of trillion đồng nationwide, representing a huge stimulus to consumer spending.

“The tax cut is a boost to consumption. Lower prices mean I could buy more,” said a shopper in Hà Nội.

According to experts, not only consumers benefit from the tax cut, but also firms.

Tạ Cao Phong, chairman of 22 Joint Stock Company, revealed that the company paid VNĐ15 billion (US$661,304) of VAT last year and was expected to pay more in 2022.

However, the tax cut in early February was going to lower its tax bill by over VNĐ3 billion ($132,261) this year. The company plans to use this money to boost production and expand its market reach.

“Lower tax rates allow us to sell more, thereby pushing up sales and profits and resulting in more stable income for our workers,” added the chairman.

Nguyễn Minh Tuấn, sales manager of Good Morning House JSC., disclosed that the company was able to put aside a substantial amount of money thanks to the reduction in the tax burden.

He said the company could plough such a tax benefit into research and development to offer better services to clients.

Mạc Quốc Anh, head of the Economic and Business Development Institute, believed the lower tax rates would also encourage foreign investments since tax cuts reduce costs and improve competitiveness.

“Lower input costs make firms more competitive,” stressed the institute’s head.

Undoubtedly, the reduction of VAT has been giving a fresh impetus to firms’ operations and speeding up economic recovery.

Director of the HCM City’s Tax Department Lê Duy Minh estimated that the new tax policy would reduce the city’s tax revenues by around VNĐ8-10 trillion ($353-441 million) this year.

Such a fall in tax collection seems financially painful to the tax authority, but he believes the tax cut would give firms a financial incentive to step up production.

“Firms making higher profits means higher revenues from other types of tax to offset the fall in VAT revenues,” added the director. 

Many retailers, supermarkets and hotels in HCM City have begun to apply the new VAT of 8 per cent.

Central Retail Việt Nam said it made the switch on February 9 with more than 20,000 items sold at its GO! and Big C networks having new prices.

Hotels and restaurants in the city followed suit days later. 

Grand Saigon Hotel said the new rate has been incorporated in all catering and accommodation fees since last week.

However, some businesses such as Starbucks and The Coffee House had yet to adopt the new rate. They said it would take a few more days to adjust price tags in their coffee chains.

Grab Việt Nam said it would incorporate the change to some services by February 15. It will refund the difference to customers via drivers’ wallet before February 26.

“If businesses fail to apply the tax cut to the detriment of its customers, they will face severe penalties imposed by tax authorities,” warned a deputy director of the Tax Policy Department under the General Department of Taxation.

The general department has also been urging e-invoice service providers to help taxpayers file their tax forms under the new tax rate. — VnExpress News