Financial policies effectively impact all aspects of economy

Dr. Le Duy Binh, CEO of Economica Vietnam

How do you evaluate the solutions to support businesses and the market?

Since the beginning of the year, in the context that the economy and businesses have faced many difficulties, the Government and the Finance sector have actively developed many fiscal policy solutions to support businesses directly. Firstly, reducing or extending the payment deadline of the land rent for businesses. This policy directly impacts many businesses using land across the country. Secondly, reducing and extending the payment deadline of some taxes, such as corporate income tax personal income tax, and regulating environmental protection tax rates on gasoline, oil, and lubricants. Most recently, reducing VAT has directly impacted final buyers in the economy and benefited many people and businesses.

The financial policies have impacted many businesses and people nationwide and positively affected many corners of the economy. In addition to these remarkable solutions, the financial sector offered other solutions, such as reducing charges in some areas to reduce the cost burden on businesses. Thus, it can be seen that fiscal policy has played a pivotal role in supporting the economy.

What are the supportive policies that have a significant impact on the market and businesses?

In this year's economic context, the room for the monetary policy to directly impact businesses and the economy is not as large as in previous years. Besides, monetary policy often has a longer lag than fiscal policy. Therefore, in addition to contributing to sharing the burden of the monetary policy, the fiscal policy will have a more direct impact on businesses in particular and the entire economy in general.

Important policies such as tax and land rent reduction have greatly supported businesses, reducing business costs. The State budget has directly shared the difficulties for businesses and supported them by reducing land rent and tax debt, directly affecting business performance. In addition, the deferred amount is also relatively large and directly helps the liquidity, reducing difficulties in cash flow, especially in the context of many businesses facing difficulties in orders and markets.

According to the Ministry of Finance, financial policies in 2023 related to reduction, an extension of the payment deadline, and exemption of taxes, charges supported businesses about VND200 trillion, equivalent to more than US$8 billion. This timely support for businesses has excellent meaning because it directly reaches businesses.

According to calculations, in 2023, the exempted and reduced amount of taxes, fees, charges and land rent is about VND75 trillion. The reduced tax amount under the 2% VAT reduction decision is about VND24 trillion. This shows that the State spent about 6% of the total state budget balance in 2023 to support businesses and people. This expresses the State's spirit of harmonizing benefits and sharing risks with the business community and people during the difficult period.

Notably, the procedures for businesses to enjoy support policies are simple and can be implemented quickly and effectively through the electronic tax system. Easy and convenient access to support policies is a strong point that businesses and people appreciate.

As for VAT, the reduced VAT amount of more than VND20,000 billion will support people's consumption activities. It contributes to maintaining a sustainable growth rate in people's final consumption - an important component of the economy's aggregate demand. At the same time, the VAT also encourages the production of consumer goods and contributes to controlling consumer prices.

Supporting and removing difficulties for people and businesses promoting production and business are still a top goal of the Government. To achieve this goal, the Ministry of Finance has determined to continue to apply proactive and flexible fiscal policy solutions to support the economy and remove difficulties for people and businesses. How will the flexible and proactive fiscal policies help management agencies advise promulgating policies to support the economy?

I think this orientation is consistent with practical requirements. The proactive and flexible fiscal policies will help fiscal policies promote their more significant and positive role than before. The current context has faced more aggregate demand problems than supply problems. Therefore, fiscal policies must have a greater direct impact to support economic recovery. In addition, reducing the financial burden so that businesses can overcome difficulties, maintain operations and be ready to return to production and business when aggregate demand recovers is highly recommended.

After over half a year, state budget revenue and expenditure data show greater room for fiscal policy to play a more active role. This orientation will open up higher-level proposals to support businesses, consumers, and economic growth in the last six months of the year, with predictions for the first six months and the last six months of 2024.

What recommendations do you have for management agencies so that support solutions continue to penetrate more effectively into businesses and markets?

Implementing fiscal policies to support businesses and people has been carried out effectively without many large-scale difficulties and problems. This results from the implementation and continuous learning of the Ministry of Finance over the past 3 years. Fast and effective implementation has helped fiscal policies penetrate directly to businesses and consumers. Most businesses and consumers identify the effect when the policies are issued and executed.

Regarding recommendations, as I said above, some policies can be considered, researched, reviewed and prepared for implementation sooner to bring greater benefits to businesses, people and the economy.

In addition, fiscal policies need to anticipate appropriate fiscal measures for the first six months of the year and the last 6 months of 2024 based on domestic and global economic developments in the coming months. That proactive and flexible spirit will help fiscal policies work smoothly with monetary policies and sectors' policies so that the economy soon returns to a fast and sustainable growth trajectory.

Thank you very much,