Recently, value-added tax (VAT) has been adjusted downwards three times, positively impacting consumer demand and the economy.

In the context where production and business activities continue to face challenges, the Government has proposed further reductions in VAT for the latter half of 2024. This is a crucial measure aimed at bolstering resilience among businesses and supporting economic development.

The 2% reduction in VAT policy contributes to lowering prices of goods, stimulating consumer demand, and creating conditions for businesses to enhance production and business activities. Pictured: Production line at Viet-Nhat Plastic Manufacturing Company (Thanh Oai district).

Boosting Consumer Demand

Recently, the National Assembly has passed resolutions three times to reduce VAT by 2%. The first instance was from February 1 to December 31, 2022; the second from July 1 to December 31, 2023; and the third from January 1 to June 30, 2024.

According to the Government’s report to the National Assembly on the outcomes of the 2% VAT reduction policy, in 2022, the support value for businesses and the public amounted to approximately 51.4 trillion dong, contributing to stimulating domestic consumer demand and increasing the total retail sales of goods and service revenues by 19.8% compared to 2021.

In 2023, the 2% reduction in VAT in the latter six months supported businesses and the public with a total of about 23.4 trillion dong. Total retail sales of goods and service revenues in Q3-2023 increased by 7.5%, and in Q4-2023 by 9.3% compared to the same period in 2022. Overall in 2023, total retail sales of goods and service revenues increased by 9.6% compared to the previous year.

In early 2024, the reduction in VAT in the first three months supported businesses and the public with approximately 11.4 trillion dong (import VAT reduced by about 4 trillion dong, equivalent to about 1.3 trillion dong per month; domestic VAT reduced by about 7.4 trillion dong, equivalent to about 2.4 trillion dong per month).

According to the General Statistics Office, total retail sales of goods and service revenues in Q1-2024 reached over 1,537 trillion dong, an 8.2% increase compared to the same period last year. The growth rate of domestic total products in Q1-2024 increased by 5.66% compared to the same period in 2023, higher than the growth rate in Q1 for the years 2020-2023.

The Government evaluates that the 2% reduction in VAT has contributed to reducing prices of goods through production and business activities of enterprises, thereby stimulating consumption, product consumption, and reversing the impact on production and business activities of enterprises, contributing to creating more jobs and income for workers.

Estimated support value about 24 trillion dong

People shopping at Aeon Mall (Long Bien district).

After a long period of battling Covid-19, domestic enterprises are in the process of recovery, yet still facing many difficulties in production and business activities. The global and regional situation is complex and unpredictable; the recovery of major trading partners is slow, with risks of supply chain disruptions…

Domestically, despite many promising sectors and fields, many policies and solutions to remove difficulties and obstacles have been effective, but challenges and difficulties are still more than opportunities and favorable conditions. Domestic consumer demand is considered a crucial driver to stimulate economic growth, hence effective financial policy solutions are needed.

In fiscal policies, the Government has proposed to the National Assembly to consider continuing to reduce VAT by 2% for some groups of goods and services currently subject to a VAT rate of 10% in the latter half of 2024. According to calculations, applying the 2% reduction in VAT policy for the latter half of 2024 would reduce the budget by about 24 trillion dong, but businesses and the public would continue to receive support, enhancing resilience.

Nguyen Thi Kim Dung, Director of Co.opmart Hanoi, stated that since the adjustment to reduce VAT, the consumption of goods by enterprises has significantly improved. In addition, reducing this tax burden helps enterprises cut costs when purchasing raw materials and other inputs, equivalent to the proportion of tax reduction in the total purchasing turnover of enterprises. This money is reinvested to promote production and business activities.

“We are very pleased that VAT may continue to be reduced in the future. We hope the Government’s proposal will be approved, along with support from many other policies to help businesses recover faster,” Nguyen Thi Kim Dung shared.