Government endorses 2% VAT cut

The Ministry of Finance, which made the proposal, has been tasked with presenting it to the National Assembly Standing Committee and getting it approved speedily.

The next House session is scheduled for next month, but the Standing Committee can approve certain things on behalf of the National Assembly.

Lowering VAT by 2 percentage points is a repeat of a policy adopted last year to support economic recovery post-pandemic.

The ministry said earlier that a tax incentive is needed to boost consumption and manufacturing amid global economic challenges.

Vietnam’s GDP expanded by 3.32% in the first quarter, the second lowest growth rate in the last 12 years and the same as in the first quarter of 2020 when Covid-19 first broke out.

The number of companies that shut down last quarter was 62,000, higher than the number of newly registered and reopening companies (57,000) for the first time.

Many factories have reduced operations and laid off employees amid a fall in global orders due to inflation and recession concerns.

The tax incentive would reduce government revenues by VND5.8 trillion a month, the ministry estimated.

It has also proposed cuts in 35 other taxes and fees in the second half of the year to support the economy. Those are estimated to cost the government coffers VND700 billion.