Vietnam plans to cut VAT to boost domestic spending

Vietnam plans to cut its value added tax (VAT) on goods and services to 8% from 10% to boost domestic consumption, state media reported on Wednesday, as its export-driven economy confronts headwinds from slowing global demand.

The tax cut proposed by the Ministry of Finance has been approved by the government, Tuoi Tre newspaper reported, adding that the plan would need parliament’s approval. The next session of parliament is scheduled to begin later this month.

The tax cut, to be effective for six months starting from June, would reduce the government’s budget revenue by 35 trillion dong ($1.49 billion), the report said, citing a government forecast.

Vietnam’s economic growth slowed to 3.32% in the January-March period, against a 5.92% year-on-year expansion in the fourth quarter of 2022. Its exports in the first four months of the year fell 11.8% from a year earlier to $108.6 billion.

Retail sales, in the domestic market with a population of 100 million, rose 12.8% in the January-April period from a year earlier, according to the General Statistics Office. ($1 = 23,450 dong)

By Khanh Vu – Reuters – May 3, 2023