Businesses expect consumption to increase when value added tax is reduced

Reducing VAT will contribute to supporting production and business activities, helping businesses recover. Photo: T.D

Raise the demand

At the beginning of July, the VAT reduced from 10% to 8% with many essential items, creating a positive effect on consumers. This is the second time that VAT is reduced by 2% synchronously from import, production to processing and consumption, not only saving a part of production costs, but also creating conditions for businesses to reduce product costs when reaching a consumer, which stimulates shopping demand, contributing to increase sales revenue.

Notably, the price reduction is seen most clearly in places of sale with clear invoices and documents such as supermarkets, trade centers, convenience stores, etc. At that time, the VAT reduction policy makes goods cheaper, directly affecting the final buyers, stimulating purchasing power.

According to some supermarket chains such as MM Mega Market, Go!, BigC, Tops Market, Aeon Mall, Satra, Co.opmart..., purchasing power from the beginning of July to now has increased significantly with an average increase of 10%-15% over the same period last year. It is known that as soon as the VAT reduction policy was applied, these supermarket systems have deeply reduced prices of thousands of products to stimulate demand, the reduction is from 10%-50%, in some places up to 70% reduction depending on the item, which focuses on the group of essential consumer goods such as cooking oil, fresh fruit, fish meat...

Mr. Nguyen Ngoc Thang, Operation Director of Co.opmart chain, said that from the first day of applying the policy of 2% VAT reduction (July 1, 2023), Saigon Co.op has implemented a discount of more than 2,000 products of the group of fresh food products, mainly meats and vegetables, an average decrease of 22%; technology foods, including soft drinks and milk, decreased by 32% on average; elegantly designed fashion and apparel products, down 42% on average; household items decreased by an average of 62%.

Ms. Nguyen Thi Bich Van, Director of Communications, Central Retail Vietnam Group, said that the unit has prepared to bring down about 4 million of product lines to the system to immediately apply the reduction of VAT to 8% for items from July 1, and now the number of customers has started to be larger at the weekend than usual.

Similarly, Vietnam Emart retailer also said that the system has applied a reduced VAT rate of 2%. In addition, in response to Ho Chi Minh City's concentrated promotions, Emart also has many discount programs up to 80%, mainly focusing on household necessities to support consumers, including discounted products including food, fashion, household goods, technology food...

Production recovery momentum

On the manufacturer's side, many businesses said that the 2% VAT reduction policy is appropriate in the current economic context; thereby production and business activities of enterprises are promoted to contribute back to the state budget as well as economic growth.

Mr. Nguyen Dang Hien, Vice Chairman of the Food and Food Association of Ho Chi Minh City, said that in the first months of the year, the purchasing power was not satisfactory. For the whole first quarter, the food consumption index of Ho Chi Minh City was estimated to decrease by 4.07%. This shows that food businesses are still facing great difficulties. Although businesses have implemented many promotions, promotion connections... but currently the purchasing power of the market is still weak. The 2% VAT reduction policy will create cheap goods and services to stimulate consumption. At that time, businesses also have the opportunity to provide products and services to the market.

According to Mr. Nguyen Trong Hoang, CEO of Phuc Thinh Packaging Co., Ltd., in the first 6 months of 2023, the consumption power of Phuc Thinh Packaging Co., Ltd. has decreased by 30% - 50% compared to the same period last year. Accordingly, the 2% VAT reduction policy has helped businesses increase product consumption, which is an opportunity for the company to reduce the selling price of products to stimulate more consumption from customers. Enterprises can maintain production, continue to pay wages to employees, reduce post-Covid-19 financial difficulties that many businesses are facing.

Similarly, Mr. Nguyen Ngoc Luan - CEO of coffee brand Meet More (Global Trade Links Co., Ltd.) also hopes that this 2% VAT discount will help stimulate shopping, thereby increasing revenue for businesses. Currently, the source of Meet More's goods at modern supermarket systems as well as other distribution systems has been fully prepared and applied to reduce the VAT rate of 8%.

The representative of Acecook Vietnam, Mr. Kaneda Hiroki, General Director of the enterprise, said that in order to reduce the VAT rate this time, the company organized a "Consumer Resilience Program" with a 3-month discount for Hao Hao instant noodles and De Nhat Pho. Besides implementing this program, from now until the end of the year, Acecook Vietnam also organizes many other solutions and promotions to stimulate purchasing power and increase sales.

Mr. Phan Van Dung, Deputy General Director of Vietnam Animal Industry Joint Stock Company (VISSAN) shared: “Businesses are very supportive of the policy of reducing VAT to 8% because this will stimulate consumption and share difficulties with people. With the government's tax reduction program along with the promotions that VISSAN has implemented, we expect revenue in the second half of the year to increase by 10-15%."