The Ministry of Finance (MoF) introduced a draft of amendments to laws on Value Added Tax(VAT) , Special Consumption Tax, Corporate Income Tax, Personal Income Tax and Natural Resources Protection Tax on August. Specifically, the ministry is planning to increase a number of different taxes and fees, including raising VAT from 10 percent to 12 percent. However, the proposal of take hike has aroused controversial in Vietnam recently.
Until now, Vietnamese government has instructed the Ministry of Finance to suspend the series of proposed tax increases. It insists that raising indirect taxes such as VAT is essential and an international norm, according to the ministry. The higher taxes were designed to make up for an inevitable shortfall that would occur when Vietnam fulfils its commitments to free trade agreements and removes import tariffs, and will also help tackle rising public debt, the ministry said.
The State Bank of Vietnam in July reduced its lending interest rate by 0.25 percent to 6.25 percent for the first time in three years to boost economic growth, as Vietnamese companies still rely heavily on bank loans. A recently-announced tax reform proposal from the MoF will result in both revenue losses and gains, with State budget revenue to improve rapidly in the near term thanks to the high tax base from value-added tax (VAT) and environmental protection tax payments, RongViet Securities wrote in a September report.
In early June, the government put forward fresh plans to tap more oil and gas, despite warnings from lawmakers of becoming over-reliant on the mining industry to fuel growth.
The Ministry of Industry and Trade will increase the amount of crude oil exploited this year by 8 percent to 13.28 million tons, and gas by 10.4 percent to 10.6 billion cubic meters. This will help add around 0.25 percent to economic growth.
At the moment, Vietnam has not followed most nations in the world in increasing its taxes. As many as 166 countries increased their taxes in 2016. In the EU, income tax increased to an average of around 21.5 per cent from 19 per cent in 2000. Vietnam neighbor’s like China, Cambodia and the Philippines have average tax levels of 17 per cent, 10 per cent and 15 per cent, respectively.
Meanwhile, the average tax level rose to higher than 19 per cent in the Organisation for Economic Co-operation and Development (OECD) nations last year, and Asian countries like Japan or India followed suit.
Earlier, the Asian Development Bank raised its forecast for Vietnam's economic growth this year from 6.3 percent to 6.5 percent, while the World Bank reversed its prediction from 6.5 percent to 6.3 percent, and the International Monetary Fund also lowered its forecast to 6.3 percent. HSBC lowers 2017 economic growth forecast for Vietnam to 6 percent from previous forecast of 6.4 percent. Vietnam has been working hard to realize its ambitious growth target of 6.7 percent for this year. In an interview with Bloomberg in late May, Vietnamese Prime Minister Nguyen Xuan Phuc said he is confident that Vietnam will meet its economic growth target of 6.7 percent, despite weak expansion in the first quarter.