The Ministry of Planning and Investment (MPI) has sent a proposal to the government to continue applying initiatives on taxes, fees, and charges, as well as rental for land and water surfaces as it did last year, though this will lead to decreases in state budget revenues.

Tax and fee support hinges on MPI proposal approval

This also covers maintaining the current VAT rate and a 50 per cent decrease in registration fees for domestically produced and assembled automobiles.

“Business and production activities of enterprises remain in big difficulties. Domestic purchasing power has reduced and people are tightening their belts,” the MPI stated. “Demands in the domestic market are still standing at a low level, while manufacturing and processing enterprises have low competition. These are among the biggest difficulties.”

Figures from the General Statistics Office showed that in the first four months of this year, almost 61,000 businesses suspended operations – up 22 per cent as compared to the same period last year; over 19,000 enterprises stopped operations and waited for dissolution procedures; and 6,400 businesses completed such procedures. On average, 21,600 enterprises were kicked out of the market every month.

Notably, in April, more than 7,600 enterprises halted operations – up 84.1 per cent on-month and 6.4 per cent on-year; 4,660 businesses stopped operations and awaited dissolution procedures; and over 1,340 enterprises completed such procedures.

Last year, 89,100 businesses suspended performance nationwide – up 20.7 per cent as compared to the previous year; 65,500 enterprises stopped operations and awaited dissolution procedures – up 28.9 per cent; and 14,400 enterprises completed such procedures.

“Enterprises are in big difficulties now and in critical need for bigger support,” stated Prime Minister Pham Minh Chinh at last week’s government meeting on Vietnam’s socioeconomic situation.

The Ministry of Finance (MoF) reported that in 2023, the total values of all policies on exempting, reducing, and extending payment of assorted taxes and other fees reached about $8.33 billion, including exemption and reductions of $3.3 billion and extensions of $5.04 billion.

Last year, extending payment of VAT, corporate income tax, and personal income tax, as well as land rental led to a reduction in the state budget revenue of an estimated sum of $4.58 billion. It is calculated that the policy to keep VAT at 8 per cent on various goods and services in recent times has led to a reduction in the state budget revenue of $833.3 million in the second half of 2023 and $1.04 billion in the first half of 2024.

The existing initiative of application of a 8 per cent VAT rate, valid from January 1, 2024 to June 20, 2024, will not apply to the following goods and services: telecommunications, IT, financial activities, banking activities, securities, insurance, trading of real estate, metals, precast metal products, mining products (excluding coal mining), coke mining, refined oil, chemical products, and goods and services subject to excise taxes. This initiative is estimated to cause a loss of $1.04 billion to the state budget revenue in the first half of 2024.

A continued 8 per cent VAT rate for the second half of this year will be discussed and voted on at the NA session taking place from May 20 to June 28.

The MoF also submitted a proposal to the National Assembly Standing Committee to release a resolution on reducing the environmental protection tax for petrol, oil, and lubricants for the whole of 2024. It is estimated that this policy will make a reduction of $1.77 billion in the state budget revenue for the year.

It is also estimated that the total value of money from exempting and reducing assorted taxes and fees in the first three months of this year will hit $858.3 million.