Reduction in Value-Added Tax (VAT) by 2% on certain products and services, extending until the year 2026.

Fresh Take:

Vietnam's capital, Hà Nội, is abuzz as the Government proposes a cool 2% reduction in Value-Added Tax (VAT) for a slew of goods and services, slashing the rate from 10% to 8%.

This shakeup, proposed by Minister of Finance Nguyễn Văn Thắng, is set to stick until the end of 2026, but with a few exceptions. The telecom, finance, real estate, and a few other sectors will continue to sail at the original VAT rate.

However, some new additions are about to join the party—gasoline, washing machines, and microwave ovens. Yep, you heard it right! Despite the special consumption tax and being a refined petroleum product, gasoline is now in the running for the VAT reduction.

Why the love for these items, you ask? Well, the Government recognizes the significant role they play in the economy and everyday life. Gasoline prices can directly impact production costs, consumer prices, and macroeconomic stability, says the proposal.

This VAT cut is expected to create a rippling effect. It's predicted to lower the price of goods and services, stimulate consumption, and drive economic growth. Meanwhile, businesses can expect lower product costs, increased competitiveness, and expanded markets.

For our daily commuters and car owners, this move could mean lighter pockets at the pump. Consumers, in general, may also see a relief in their daily living and consumption costs.

But, as with any economic shift, there's a catch. The Ministry of Finance estimates that this change could lead to a substantial decrease in state revenue—around VNĐ121.74 trillion (approximately US$4.69 billion) over the proposed period.

Despite this potential financial strain, the Minister of Finance believes that the reduction will contribute to macroeconomic stability and ultimately result in long-term economic benefits for the country.

Many National Assembly deputies back this Government proposal for expanding VAT incentives, viewing it as essential for businesses, maintaining stability, and fostering growth amid current challenges. However, they called for clear and practical measures to avoid complications during implementation and for a more comprehensive assessment of the policy's impact on state budget revenues.

In a twist, some deputies have even suggested reviewing the list of excluded goods from the VAT reduction, particularly those affected by international trade conflicts or reciprocal tax measures from countries like the US. They argue that extending support to these sectors could help shield domestic businesses from external economic pressures. [1][2][3][4][5]

This 2% VAT reduction is more than just a number. It's a move to energize the economy, stimulate consumption, and facilitate growth. Let's see how it shapes up for Vietnam and its citizens.

[1] Lowered VAT to encourage business expansion, create jobs, and bring long-term economic benefits.[2] Exceptions to VAT reduction include telecommunications, financial services, banking, insurance, securities, real estate, metal products, mining (except coal), and items subject to special consumption tax (except for gasoline).[3] The State has proposed adding gasoline, washing machines, and microwave ovens to the list of goods eligible for the 2% VAT reduction.[4] The policy is expected to positively impact consumer spending, stimulate consumption, and promote business and production activities.[5] Pressure on domestic businesses from international trade conflicts and reciprocal tax measures.

A customer buys petrol at a station in Hà Nội. VNA/VNS Photo Trần Việt

This 2% Value-Added Tax (VAT) reduction proposed by the Vietnamese Government is aimed at energizing the economy, stimulating consumption, and facilitating growth.
The reduction is predicted to lower the price of goods and services, stimulate consumption, and drive economic growth, providing benefits for businesses.
Businesses can expect lower product costs, increased competitiveness, and expanded markets as a result of this VAT cut.
For daily commuters and car owners, this move could mean lighter pockets at the pump, as gasoline has been added to the list of goods eligible for the VAT reduction, despite being a refined petroleum product and being subject to special consumption tax.
The Minister of Finance believes that the reduction will contribute to macroeconomic stability and ultimately result in long-term economic benefits for the country, despite the potential financial strain of a substantial decrease in state revenue.
Some National Assembly deputies have suggested reviewing the list of excluded goods from the VAT reduction, particularly those affected by international trade conflicts or reciprocal tax measures from countries like the US, to help shield domestic businesses from external economic pressures.
The economy's overall health and the well-being of its citizens will depend on how this policy unfolds in the coming years, as it navigates the competing forces of business growth, employment, and government finance.

Reduction in Value-Added Tax (VAT) by 2% on certain products and services, extending until the year 2026.