Vietnam to extend VAT cut until June despite $1bn revenue loss

The Vietnamese government said on Tuesday it plans to extend a rate cut for the value-added tax (VAT) until the end of June to boost domestic consumption and production as the global economy remains sluggish.

The extended cut still needs parliament’s approval. The reduction, to 8% from 10%, took effect in July and is set to expire by the end of this year. The next session of parliament is scheduled to begin next week.

The 8% rate is not applicable to services and products like banking, finance, telecommunications and real estate, the government said in a statement.

The cut, which is expected to boost domestic consumption, would reduce the government’s budget revenue by 25 trillion dong ($1.02 billion), the statement added.

Vietnam’s economic growth rose 5.33% in the third quarter, higher than the 4.05% for the previous one, official data shows.

Headline inflation continued a sharp upward increase that started in June, official data shows. September’s consumer price index rose 3.7% in September from a year earlier.

While economic growth picked up in the July-September period thanks to a gradual recovery in exports, domestic consumption remained subdued and credit growth continued to be slow reflecting weak private domestic investment and investor confidence, the World Bank said in its latest report.

Retail sales in the country of nearly 100 million rose 9.7% in the first nine months of this year from a year earlier, according to the General Statistics Office.

Reuters – October 17, 2023