VAT remission is critical

According to the General Statistics Office, the index of industrial production (IIP) was estimated to decrease by 1.8% in the first four months of 2023 compared to the same period last year; total registered foreign investment in Vietnam as of April 20, 2023, decreased by 17.9% compared to the same period last year, with foreign direct investment (FDI) falling by 1.2%.

In response to the economic slowdown, the Government issued policies in the first months of 2023 to reduce land rent and environmental protection tax on gasoline and oil products, as well as extend tax payment and land rent.

Up to now, the continuing VAT remission by 2% has been expected by citizens and businesses. According to Dr. To Hoai Nam - Permanent Vice Chairman and General Secretary of the Vietnam Association of Small and Medium Enterprises, the proposed 2% VAT reduction demonstrates the Government's timely participation in continuing to support the business community in recovering production and business.

Businesses receive more incentives to grow

Concerning the current business difficulties, Mr. Nguyen Van Hung, Director of Hung Phat Company (Hanoi), a furniture manufacturer demonstrated that since the end of 2022, businesses have faced plenty of difficulties, such as high input costs of business, logistics costs, input materials, and rising interest rates. In addition, due to the decrease in purchasing power, the product consumption market has halved compared to the period before the Covid-19 outbreak.

As a result, when the Government extends and reduces taxes and fees, businesses are excited because they can receive more capital to develop production and business in difficult bank loan conditions where interest rates are still high today According to Mr. Hung, the tax remission has a positive impact on businesses by allowing them to lower input costs, thereby lowering the price of the goods they sell. It also partially supports consumers, thus boosting domestic consumption.

Mr. Doan The Xuyen - Director of Phuc Xuyen Company (Quang Ninh province) shared as a passenger transport business unit: "This year can be said to be the most challenging year for businesses."

Since the beginning of 2023, my transport business has also encountered numerous challenges. First, the company has run out of time to restructure bank debt due to rising interest rates, though the bank has recently adjusted interest rates slightly. Second, as people cut back on spending, the number of passengers driving has dropped dramatically. Since the beginning of the year, the number of passengers has dropped by 70% when compared to the time before the Covid-19 pandemic. Third, gasoline prices remain high, so input costs cannot fall significantly. According to Mr. Xuyen, the 2% VAT reduction helps transportation businesses reduce fares, which benefits consumers when they travel.

This is a very positive move by the Government to stimulate demand and provide citizens and businesses with the most practical assistance possible during this difficult time. "Transport businesses have been hardest hit by the Covid-19 pandemic; they have just recovered their business, but they still face a lot of difficulties. If there is more support for VAT reduction, it will help businesses recover quickly," emphasized Mr. Xuyen.

The reduction in VAT will benefit not only the transportation sector but also other sectors, as prices will fall, promoting domestic consumption and exerting a positive socioeconomic impact./.