NA deputies call for extended VAT cuts

June 03, 2023 - 07:29
The time frame should be extended to 2024 to give the economy more time to absorb the fiscal stimulus
Consumers at a supermarket in Hà Nội. NA deputies are calling for extended VAT cuts to further stimulate domestic consumption. VNA/VNS Photo Trần Việt

HÀ NỘI — National Assembly deputies are pushing hard for extended VAT cuts applicable to all firms across the board, but the Minister of Finance Hồ Đức Phớc stands firm against the call.

NA deputy Trần Chí Cường from Đà Nẵng City said the VAT cuts initiated in May would come into force from July 1 to December 31, which is too short a period of time to produce their desired effect.

He called for the time frame to be extended to 2024 to give the economy more time to absorb the fiscal stimulus. He also said it would take local authorities at least one year to re-balance their budget given the size of the cuts.

NA deputy Mai Thị Phương Hoa from Nam Định Province shared this view. She said the VAT cuts would need more time to take root and six months would be too short a period to that end.

She also urged the Government to loosen its purse strings for borrowers by cutting lending rates to below 9 per cent and offering more favourable loans to the business community.

NA deputy Nguyễn Thị Việt Nga from Hải Dương Province pressed for a broader scope of the cuts to support the automobile industry. She said an automotive tax cut would pay for itself as the ensuing rise in car sales would offset its costs to the State budget.

NA deputy Vũ Tiến Lộc from Hà Nội City viewed the VAT cuts as a real lifesaver to domestic firms, which were finding themselves in financial distress in the wake of the global downturn.

As falling inflation, rising trade surplus, and public debts in check had given the country much room for fiscal manoeuvers, the deputy clamoured for extended VAT cuts to magnify their effect on the economy.

"I suggest extending the VAT cuts to late 2024 and broadening their scope to cover all categories of goods and services," Lộc said.

The deputy believed that the direct fiscal revenue loss caused by the extended VAT cuts would be outweighed by the indirect gain from increased domestic consumption.

In response to the call for extended VAT cuts, Finance Minister Hồ Đức Phớc said the time frame could not exceed six months because the original VAT cuts were formulated in accordance with Resolution No 43, which will remain effective in no more than six months.

"The original VAT cuts have been well formulated in that they will give a huge push to consumption demand while ensuring a balanced fiscal budget," Phớc added.

The minister also turned down the call for widening their scope to cover the automobile industry. He said automobiles would not be eligible for the VAT cuts because this category of goods falls outside the scope of Resolution No 43.

He also said what is important is not offering more tax cuts, but taking measures to improve firms' competitive advantages and laying the foundation for a more efficient market.

"For firms dogged by falling orders, favourable policies to help them retain customer base seem to be more useful than tax cuts," he said. — VNS