Minister of Finance Ho Duc Phoc. Photo: VOV.VN

According to the Minister, the tax cut is necessary to promptly respond to socio-economic developments. If approved by the National Assembly, Vietnam will continue to enforce its policy of cutting value added tax by 2% for the remaining six months of this year, from July to December.

To offset budget revenue, which is expected to shrink by 24 trillion VND (1 billion USD), the Finance Minister said, “The Government directs the Ministry of Finance and other ministries and localities to focus on effectively enforcing the Tax Laws, continue to reform and modernize the tax system, and simplify tax administrative procedures. Simultaneously, the State budget expenditure must be strictly controlled, and recurrent expenditure must be thoroughly saved.”

On the sidelines of the National Assembly session, deputies agreed with the Government's proposal to cut value added tax to stimulate consumption demand amid reduced aggregate demand and the current economic difficulties.

Le Thanh Van, a deputy representing Ca Mau province, said that the tax cut will help businesses reduce costs, increase sales and stimulate growth. According to deputy Tran Van Lam for Bac Giang province, a temporary 2% tax cut is acceptable.

Last year was the first year that Vietnam cut the value-added tax rate by 2% for most items subject to the 10% tax rate to 8% for the first half of the year, contributing to reducing the cost of goods and services, promoting production and business and creating more jobs.

As tax cut helps stimulate domestic demand, it will create more revenue for the state budget. Last year’s total retail sales of consumer goods and services increased by 19.8% over the previous year, the domestic value-added tax collection did not decrease but increased by 10%.