Economists are recommending that reductions to value added tax (VAT) rates from 10 per cent to 8 per cent continue into 2023 given the ongoing risk of global recession and the associated negative consequences for Vietnam’s economy.

VAT rates on goods and services were cut from 10 per cent to 8 per cent from February 1, 2022 as part of the government’s stimulus program for socioeconomic recovery and development.

In the year since, the policy has reportedly had a positive effect on Vietnam’s economy, directly and indirectly contributing to bright points during 2022.

Economist Ngo Tri Long said the financial support packages introduced over the past two years have borne fruit, with economic recovery and improved State budget collections being due to the recovery of enterprises.

“However, in the short term, the challenges will remain visible, so it is imperative to continue implementing support packages that have been effective and to make adjustment where necessary to make them suitable to new developments,” he said.

Dr. Dinh Trong Thinh, meanwhile, said fiscal policies, particularly support on taxes and fees, which were introduced and implemented in the fastest and most timely manner, have benefited businesses and individuals.

“For example, the 2 per cent reduction on certain goods taxed at a VAT rate of 10 per cent has helped lower sales prices, thereby increasing spending and creating conditions for businesses to expand production,” he said. “Lower sales prices also ease inflationary pressure. As such, the VAT reduction policy has had a dual effect, stimulating production, and stabilizing the macroeconomy and reducing inflationary pressure.”

Deputy General Secretary of the Vietnam Chamber of Commerce and Industry (VCCI), Dau Anh Tuan, said the 2 per cent VAT reduction is an incentive that should continue into 2023.

“Businesses, individuals, and the economy in general still face numerous difficulties and challenges,” he said.