Finance ministry again pushing for VAT rate hike

The Ministry of Finance (MoF) is once again looking at raising the value added tax (VAT) rate from the current 10 per cent to 11 per cent in 2019 and then 12 per cent in 2020, after it issued a proposal in August last year calling for a 12 per cent rate starting next year. The reason behind increasing the rate remains the same: Vietnam’s public debt is rising and increasing the VAT rate is in accordance with international norms, the ministry said in its draft proposal. The average tax rate in EU countries was 19 per cent in 2000 and 21.5 per cent in 2014. It was 18 per cent in 2000 and 19 per cent in 2014 in OECD countries. If the proposal was to be approved, Vietnam would have the second-highest VAT rate in Southeast Asia, after only the Philippines, which has a rate of 18 per cent. The ministry last year asked to increase a number of different taxes and fees, including VAT, and its proposed 2 per cent VAT hike triggered heated debate among economists, policymakers, and businesses. The ministry said the higher tax would make up for government revenue losses when Vietnam fulfils its commitment to cut import tariffs under free trade agreements and help tackle rising public debt, insisting that the current rate is too low. However, some experts and analysts believe such an increase would have a negative impact on consumption and potential effects on growth.  “Raising taxes may lead to lower… [Read full story]

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