In the coming years, Vietnamese consumers may find themselves shelling out more cash for goods and services.
Earlier this week, officials from the Ministry of Finance (MoF) announced a proposal to raise the country’s Value Added Tax (VAT) from the current 10% to 12%, reports Tuoi Tre. If approved, the tax hike would take effect in 2019. Officials also noted that the list of goods exempt from VAT would be reduced.
Current tax law also imposes a preferential 5% VAT on certain goods used in agriculture, medicine, education, science and technology, however the MoF proposal would also bump this figure up to 6%.
The move comes as Vietnam grapples with rising public debt. According to the Bangkok Post, ministry forecasts put Vietnam’s public debt at 64.8% of its gross domestic product in 2017, only 0.2% shy of the threshold set by government officials for the 2016-2018 period. Last year, in a push to bring transparency to government spending, MoF officials even went so far as to propose installing debt clocks in three major cities.
Among economic experts and business owners, the proposed tax increase has received mixed reviews. Some argue that the tax hike could help to reduce public debt. Experts point out this increase is unlikely to affect businesses in any major way and would have a negligible impact on consumers forced to shell out a few thousand extra dong.
On the other hand, however, some have come out against the plan, arguing that government offices should work to bring spending under control before raising taxes on the public. In an interview with VietnamNet, chairman of Hung Yen Garment JSC Nguyen Xuan Duong told the news outlet the VAT hike would likely not affect businesses greatly but that the public would need to know where the money is going.
Economic expert Nguyen Duc Thanh, who spoke to Tien Phong on the subject, also urged the government to reconsider its own spending before increasing taxes on the public.
Beyond the VAT increase, MoF officials have also announced a proposal to double the special consumption tax (SCT) on pickup trucks, raising the cost to 15-30%, depending on the vehicle model. Soft drinks are also expected to come with a 10% SCT by 2019, while packs of 20 cigarettes will receive a staggering 75% SCT that same year.
While these proposals have not yet been approved, Tien Phong reports that officials are leaning toward this tax increase rather than the MoF’s second option, which would involve raising VAT to 12% from 2019 and then again to 14% in 2021.
MoF officials also aim to amend the laws on personal income tax, corporate income tax and natural resources tax.
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