In addition to the recently issued tax deadline extension policy, the Government has recently proposed to the National Assembly to reduce the Value Added Tax (VAT) rate from 10% to 8% in 2023. The anticipated tax reduction aims to provide timely support to manufacturing businesses and stimulate growth.
1. Economic Situation in Vietnam in the Early Months of 2023
The Vietnamese economy in the early months of the year is taking place in a complex global context. Nevertheless, Vietnam is showing clear signs of recovery thanks to the effectiveness of domestic demand stimulus policies, trade openness, and economic promotion. However, many manufacturing businesses, in particular, are still facing significant challenges. Amid global inflation, export activities are encountering numerous obstacles, and international markets are reducing consumption. As a result, businesses greatly need government support policies.
2. Implementation of Business Support Policies
The tax deadline extension policy primarily supports businesses’ cash flow. With this policy, when the extended period expires, taxpayers still have to repay the tax amount. Therefore, only a specific group of entities can benefit from this policy, similar to entities receiving interest-free loans from the state for a certain period. Thus, the impact of the extension policy is only temporary.
3. Anticipated Reduction in Value Added Tax in 2023
Reducing VAT has a broader impact than the tax deadline extension policy since it does not specify a group of beneficiaries. The anticipated tax reduction will affect all businesses and consumers. When VAT is reduced, the prices of goods will decrease significantly, helping to control inflation.
In 2022, the 2% reduction in VAT rates was implemented from early February. This application resulted in nearly a 20% increase in the total retail sales of goods and consumer service revenues.
However, the economic growth in the first quarter of 2023 has been very low. The number of businesses has decreased due to fewer new entrants compared to those exiting the market. Implementing the VAT reduction for 2023 will require waiting for the fifth session to be approved, so it can only be implemented from 7 January 2023. Consequently, the VAT reduction will have a shorter duration, only 6 months instead of 11 months as in 2022. The VAT reduction will immediately impact production, business activities, and consumption in the last six months of this year, with an estimated minimum reduction amount of 35,000 trillion VND.
(Extracted from Investment Newspaper on 24 April 2023)
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