The Ministry of Finance has just proposed to reduce 2% of value-added tax (VAT) in the first 6 months of 2025 to stimulate consumption and support businesses and people to overcome economic difficulties. This move not only brings practical benefits to stakeholders but also demonstrates the Government's efforts in maintaining the momentum of national economic recovery and development.
Let's join Bizzi to learn more about this proposal and the impacts it brings.
Proposed content of VAT reduction 2%
According to the Ministry of Finance, the policy of reducing the VAT rate by 2% applies to groups of goods and services currently subject to the tax rate of 10%, bringing it down to 8%. However, some specific groups of goods and services will not be subject to tax reduction, including:
- Telecommunications, information technology.
- Finance, banking, securities, insurance.
- Real estate business.
- Products from prefabricated metals, mining (except coal mining).
- Coke, refined petroleum, chemicals, and items subject to excise tax.
This policy is expected to take effect from January 1, 2025 to June 30, 2025. It is estimated that the state budget will reduce revenue by about VND 25 trillion in the first 6 months of 2025, equivalent to VND 4,175 trillion/month.
Of which, domestic revenue will decrease by about 2.5 trillion VND/month and import revenue will decrease by about 1.5 trillion VND/month.
Reasons for proposing VAT reduction
The Ministry of Finance believes that tax reduction is necessary to achieve the following goals:
- Stimulate domestic consumption: Reducing prices of goods and services will promote people's consumption, increasing competitiveness for domestic enterprises.
- Support business recovery: In the context of economic difficulties, this policy helps reduce production and business costs, thereby improving business profits and competitiveness.
- Promote production and create jobsStimulating consumer demand indirectly supports manufacturing and business sectors, thereby creating more jobs for workers.
- Macroeconomic stability: Tax reduction helps control inflation and maintain economic stability in the context of global economic instability.
This proposal also aims to achieve the objectives in Socio-economic development plan for the period 2021 - 2025, with a focus on achieving GDP growth of 6.5% to 7% in 2025.
Economic context and current challenges
International context
The global economy is under great pressure from geopolitical instability and economic protectionism in many countries. These factors slow down growth and affect import and export activities of Vietnam - an economy heavily dependent on international trade.
Domestic situation
In Vietnam, some major challenges are emerging:
- Businesses withdraw from the market: The number of businesses ceasing operations remains high, putting great pressure on the economy.
- Weak public investment and consumption: The speed of public investment disbursement and people's purchasing power have not met expectations.
- Difficulties in productionEnterprises face barriers in input materials, technology and growth model transformation.
- Business environment and institutions:The reform process remains slow, posing risks to investment and business activities.
These factors make the 2025 economic growth target challenging, requiring timely support measures.
Impact of VAT reduction policy
Positive
- Discount on goods and services: Tax reduction will help lower product prices, thereby stimulating domestic consumption.
- Increase profits for business: With reduced production costs, businesses will have more resources to invest and expand their business operations.
- Job creation: As businesses recover and grow, labor demand will also increase, contributing to reducing unemployment rates.
- Promote economic growthStimulating consumption and production will create great momentum for economic growth, supporting the achievement of planning goals.
Limit
However, the policy may also encounter some difficulties:
- Reduced budget revenue: The budget is estimated to decrease by about 25 trillion VND in 6 months, requiring management agencies to have an effective compensation plan.
- Problems in implementation: Determining which goods and services are subject to reduced tax rates can be difficult, especially for multi-functional and multi-component goods.
Additional solutions for greater efficiency
In addition to reducing VAT, the Ministry of Finance also proposed reducing environmental protection tax on gasoline, oil and grease. These are considered practical solutions to help reduce product costs, support production and control inflation. In addition, it is necessary to promote:
- Administrative reform: Simplify tax procedures to make it easier for businesses and people to access policies.
- Enhanced monitoring: Ensure transparency and efficiency in implementation, avoiding policy abuse.
- Business environment innovation: Create favorable conditions for business development and improve competitiveness.
The importance of VAT reduction for the economy
Reducing VAT is not only a short-term support measure but also has strategic significance for the economy:
- Promoting long-term growth: Tax reduction helps businesses reduce costs, reinvest in production and expand scale.
- Strengthening people's confidence: The policy facilitates consumers' access to goods at reasonable prices, thereby stimulating consumption.
- Ensuring social stability: Help people and businesses overcome economic difficulties, contributing to maintaining social stability.
Conclude
The proposal to reduce value-added tax 2% in the first 6 months of 2025 is the right step by the Ministry of Finance to support businesses, people and stimulate the economy. Although there are still some challenges in implementation, this policy is still expected to bring positive results, contributing to maintaining economic recovery momentum and achieving development goals in the coming period.
The Government and relevant agencies need to coordinate closely to effectively implement policies, ensuring transparency and consistency, thereby bringing maximum benefits to the economy and society.
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