The government's recent series of fiscal measures, such as a 2% reduction in value-added tax and the extension of land lease payment deadlines, have been a driving force in boosting business in a challenging environment, local insiders said.

Inside the Vinfast factory. Photo: Pham Hung/The Hanoi Times

Fees and charges reduced by 10-50%

In late June, the Ministry of Finance (MoF) issued Circular No. 43/TT-BTC, according to which 36 fees and charges will be reduced by 10-50% from  July 1 to the end of December 2024. The policy will result in a decline in budget revenues of around VND700 billion (US$27.3 million).

Earlier, in mid-June, the government issued Decree No. 64 to extend the payment deadline for some taxes, such as VAT, corporate income tax, personal income tax and land rent, from June 17  to the end of December 2024. The Ministry of Finance estimates that the total amount of deferred payments is close to 84 trillion dong (nearly $3.3 billion).

In addition, Government Decree No. 72 (dated June 30, 2024) provides for the reduction of VAT in accordance with Resolution No. 142 adopted by the National Assembly on June 29. This decree is effective from July 1 to December 31, 2024. Specifically, the VAT rate will be reduced from 10% to 8% for most goods and services, with the exception of telecommunications, finance, banking, securities, insurance, real estate and metals.

This is the fourth time that the National Assembly and the Government have decided to prolong the VAT reduction to support enterprises and individuals in their productive and commercial activities. It is anticipated that this policy's implementation in the final six months of 2024 will result in a roughly 24 trillion dong drop in budget income.

The extension of taxes and land lease payments, in the opinion of local economist Dinh Trong Thinh, will lessen the financial strain on enterprises. Consumers will also pay less for products as a result of the 2% VAT cut.

Local businesses will ultimately benefit from the broad impact of tax and fee exemptions and reductions on business, sales and inventory management: improved operational efficiency and ability to meet customer demand.

VAT reduction boosts business and consumers

Big C Thang Long supermarket. Photo: Thanh Hai/ The Hanoi Times

Nguyen Thi Kim Dung, Director of Co.opmart Ha Dong, said that the VAT reduction will help stimulate spending, while enterprises can save about 2% of financial resources to reinvest in production and business development.

She said that the continuation of the VAT cut will boost purchasing power, especially during the upcoming holidays. This should lead to an increase in supermarket sales and business performance.

Nguyen Minh Nguyet, Deputy Director of Hung Nguyet Garment Company (Long Bien District), said that extending the deadline for paying taxes and land rent is like the government giving interest-free loans to businesses.

"This year, the continued extension of payment deadlines for VAT, corporate income tax, personal income tax and land rent is positive news for businesses," she said.

Local economist Dinh Trong Thinh suggested stronger communication by the government so that people and businesses are informed and can benefit from these policies.

In addition, local authorities should provide specific guidance on which goods are eligible for VAT reduction, as this confuses businesses. The administration should also provide clear instructions on the procedures and documentation required for tax deferral to minimize costs and time for local businesses, he stressed.