Officially reduce 2% Value Added Tax from July 1, 2023, making benefits to business

In the afternoon of June 24, the National Assembly officially adopted the Resolution of the 5th session, the XV National Assembly. Accordingly, the National Assembly has agreed to reduce 2% value-added tax (VAT) for groups of goods and services that are applying the value-added tax rate of 10% (to 8%).

The tax reduction does not apply to goods such as telecommunications, information technology, finance, banking, securities, insurance, real estate trading, metals, products from prefabricated metals, mining products, refined petroleum, chemical products and items subject to excise tax. According to the resolution, the 2% reduction in VAT will apply from July 1, 2023 to December 31, 2023.

Previously, there were suggestions to expand the scope of subjects to be reduced by 2%, applicable to all groups of goods and services that are applying the tax rate of 10%; raise the reduction to 3%, 4% and extend the policy application period until the middle or end of 2024.

Answering this issue, on behalf of the National Assembly Standing Committee, General Secretary of the National Assembly Bui Van Cuong said that if the scope is further expanded, the level of value-added tax reduction will have a great impact on state budget revenue, the Government has not fully calculated and assessed the impact of the policy,  especially in the context that the state budget revenue in the first months of the year decreased compared to the same period last year.

Therefore, the National Assembly Standing Committee requests permission from the National Assembly to keep the scope and extent of value-added tax reduction as drafted in the Resolution, and at the same time, requests the Government to report to the National Assembly at the 6th session the results of the implementation of the 2% value-added tax reduction policy along with the results of the implementation of Resolution No. 43 for the National Assembly to consider,  decide on additional solutions to support economic recovery and development (if any).

Regarding the impact of the policy, according to the Government's submission, if the reduction of 2% VAT is applied in the last 6 months of the year, it is expected to reduce the State budget revenue equivalent to about VND 24,000 billion (for the State budget revenue in 2023, it is expected to reduce VND 20,000 billion due to the VAT payable in December 2023 paid in January 2024).

People are the direct beneficiaries of this policy. The reduction of VAT on goods and services subject to 10% VAT will contribute to reducing selling prices, thereby contributing to directly reducing people's costs in daily consumption of goods and services.

For businesses, reducing VAT will contribute to reducing production costs, lowering product costs, thereby helping businesses increase resilience and expand production and business.