Consumers choose food items from a minimart shelf. (Photo: VNA)As part of the stimulus programme, VAT for applicable goods and services willbe cut down to 8 percent in 2022 (down two percent from the current rate), withthe reduction set to begin from February.
The move has been said to amount to a 49.4 trillion VND (2.17 billion USD) taxbreak for businesses, nearly three times the tax cut they received throughout2021, according to Minister of Finance Ho Duc Phoc.
Phoc said the Government favoured VAT reduction over income tax reductionbecause a VAT cut will help all businesses, not just those who reported profit.
According to the minister, a majority of firms would be eligible for the VATcut with the exceptions of firms in the fields of telecommunications, bankingand finance, property development, mining and metallurgy, refinery andpetrochemicals, among others.
Products and services that were not required to pay VAT tax or at 5 per VAT taxor under special VAT tax are not affected by the cut.
According to a proposal put forward by the Ministry of Finance, firms may eveninclude expenses incurred in their efforts to prevent the spread of the novelcoronavirus in income tax forms.
Economists and firms have voiced their concern over how a 2 percent reductionin VAT may not be able to produce the intended effect to boost consumption andbusiness activities in 2022. Others lamented over the date on which the cutwill take effect February 1, saying it's a missed opportunity to giveconsumption a massive boost right before the Lunar New Year.
Addressing said concerns, minister Phoc said the Government still has tobalance its budget and a tax cut greater than 2 percent would put this year'sfiscal policy under great pressure.
While the cut this year covered more products and services, it is smaller thanlast year tax cut at 3 percent VAT but only included transportation, travel andfood and beverages.
Commenting on a proposal to increase tax on stock market exchanges, theminister said the Government currently has no plan to levy additional taxes.
"In 2021, the stock market's capitalisation reached 7.7 quadrillion VND,equivalent to 92.5 percent of total GDP. It has been an effective platform tosecure investment for the economy," he said.
However, the Government has been considering stricter bond regulations forfirms, especially those that cannot produce collateral./.
VNA
