Fiscal policy expansion to bolster economic revival

The Ministry of Finance remains committed to guiding all levels of governance in aiding individuals and businesses to reinvigorate their production and commerce. (Photo: H.Anh)

In response to socio-economic fluctuations, the Ministry of Finance, after deploying a series of tax, fee, charge, and land rent relief measures in 2023, continues to devise supportive policies for the commercial sector in 2024, earning commendation from industry circles.

Finance Minister Ho Duc Phuoc asserts that policy reviews and evaluations will be ongoing, and should "real-life needs" arise—wherein the populace, businesses, and the broader economy are still struggling—the Ministry will promptly recommend prolonging such initiatives, ensuring both meticulous oversight and alignment with fiscal objectives and national budgetary assignments.

"Despite a gradual resurgence and optimistic forecast across various sectors, the persistence of more difficulties than opportunities necessitates further fiscal policy maneuvers to invigorate domestic demand," the Minister highlighted.

Recognizing the outcomes of the 2% VAT reduction under Resolution No. 101/2023/QH15, the Ministry acknowledges the necessity of extending VAT cuts through the initial half of 2024, to alleviate burdens on businesses and consumers. Subsequently, it has proposed to the Prime Minister a continued VAT reduction to 8% for certain goods and services, with some exclusions, as delineated in Resolutions No. 43/2022/QH15 and No. 101/2023/QH15.

Additionally, the Ministry has suggested prolonging the decreased environmental protection tax on fuels, whose effect will end in 2023, until the conclusion of 2024, in line with Resolution No. 30/2022/UBTVQH15 of the National Assembly's Standing Committee, to mitigate the effects on public livelihoods and commercial production.

Upon evaluating the Ministry's propositions and consulting various enterprises and specialists, the Vietnam Chamber of Commerce and Industry (VCCI) conveyed that Vietnam faces myriad economic challenges in 2023, with growth forecasts barely surpassing 5%—exceptionally low by historical standards, barring the pandemic years. The VCCI stressed that the extension of VAT reduction is crucial, energizing business resurgence and job creation. They noted the tangible positive effects of VAT reduction in 2022 and 2023, particularly in boosting internal consumption amidst export challenges.

Concerning the continued easing of the environmental protection tax on petrol in 2024, VCCI concurs with the draft Resolution, deeming it an actionable strategy for inflation control, macroeconomic stabilization, and business and economic recovery support during trying times.

Economist Dinh Trong Thinh supports the 50% tax reduction extension on petrol for 2024, citing the essential role of fuels in daily life and industry, with price swings affecting a broad societal spectrum. Amidst enduring production hardships, a tax cut could alleviate the cost pressures for businesses.

VCCI, commenting on the VAT reduction's execution in early 2024, observed considerable difficulties in its application, particularly concerning the delineation of taxable goods. Despite regulatory guidance through Decrees 15/2022/ND-CP and 44/2023/ND-CP, uncertainties in tax categorization remain, leaving enterprises hesitant in tax rate application, and requiring additional accountancy resources. Hence, VCCI recommends creating a uniform VAT rate reduction for all goods and services in the first semester of 2024.

Minister Phuoc confirmed the Ministry's determination to collaborate with various ministries, sectors, and local entities to enforce adaptable fiscal policies, underpinning macroeconomic stability, and inflation restraint, and ensuring balanced economic dynamics. The Ministry is focused on accelerating public investment disbursement, optimizing budget expenditure, and fostering a culture of frugality and opposition to waste. By persistently addressing business and public difficulties and cultivating sustainable revenue streams, the Ministry will continue providing counsel on recovery support for production and commerce. At the same time, it will amplify the adoption of information technology, expedite digital transformation, rigorously reform administrative processes, enhance civil service efficiency and ethics, refine policies, and resolve legal hindrances to facilitate entrepreneurial activities.