VietNamNet Bridge - Phap Luat TP HCM has quoted sources as reporting that the Ministry of Finance (MOF) has sent drafts of tax laws to the Ministry of Justice (MOJ) before being submitted to the Prime Minister and NA for approval in 2018.

MOF insists on the necessity of raising VAT

MOF insists on the necessity of raising the VAT rate from 10 percent to 12 percent. 

The opinions of other ministries vary: while the Ministry of Interior Affairs and SBV (State Bank of Vietnam) advocate the MOF view, others have proposed to reconsider the tax increase plan.

MPI (Ministry of Planning and Investment) commented that the tax increase will help increase the state budget revenue from tax collection, but policies need to be designed in a way to serve as the driving force for economic development and create favorable conditions for enterprises to develop.

“GSO (General Statistics Office) has estimated that the VAT increase to 12 percent will have an impact on the economy, causing the GDP growth rate decrease by 0.5 percent and CPI increase by 2.28 percent. Therefore, MOF should consider the tax adjustment thoroughly,” MPI stated.

In reply, MOF said while a poor household can save VND10,000 with low VAT rate, a rich household will be able to save VND40,000. This means that the low VAT rate can bring higher benefits to the rich than the poor.

However, MOF’s argument is believed to be unreasonable. Ngo Tri Long, a price expert, said low-income earners have to spend larger proportions of their incomes on consumption, therefore, the burden on their shoulders will be heavier.

“This means that low-income earners will be hurt more than high-income earners if the tax rate is raised,” Long said.

Regarding luxury tax, MOF continues proposing to raise the tax rate on instant coffee and tea so as to help reduce obesity in Vietnam.

Vinacafe JSC has protested the plan, saying that coffee is a popular drink among Vietnamese and it is good for people’s health at a rational intake.

VCCI (Vietnam Chamber of Commerce and Industry) also warned that taxation on soft drinks will affect businesses and people. The taxation designed by MOF will not only make soft drink and sugar manufacturers and sugar cane growers suffer, but also affect the coffee, tea, fruit and dairy industries.

Therefore, VCCI proposed not to tax on soft drink until there is deeper research about obesity and the effects of tax policies on obesity reduction in Vietnam.

Long warned that the tax increase plan will face strong opposition from the public, because it is contrary to the government’s view that it is necessary to stimulate demand and ensure GDP growth.

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