VINACHEM

Domestic consumption is considered one of the key drivers of economic growth. To achieve the 2025 economic growth target of over 8%, boosting consumer demand, particularly through the continued 2% cut in value-added tax (VAT), is seen as a crucial solution.

According to the Ministry of Finance, domestic consumption has shown more positive signs. In the first quarter of 2025, the services sector grew by 7.7%, contributing over 53% to total GDP growth. This is the highest rate in six years, indicating a gradual recovery in domestic demand.

Throughout the reviewed period, total retail sales of goods and consumer service revenue rose by 9.9% on year. However, this remains below the full-year target of 12% and poses a major challenge for meeting this year’s growth scenarios.

To boost consumption, the Ministry of Finance has proposed extending the 2% VAT cut for goods and services currently subject to the 10% rate, bringing it down to 8%, while excluding sectors such as telecommunications, finance, banking, real estate, metals, mining (except coal), and items subject to special consumption tax (except gasoline). The proposed timeframe is from July 1, 2025 to December 31, 2026.

From 2022 to 2024, the VAT cut policy saved about VND 123.8 trillion for businesses and consumers, helping stimulate domestic spending and economic growth. In 2024, GDP grew by over 7%, with all 15 out of 15 socio-economic development targets met or exceeded.

The National Assembly’s Committee for Economic and Financial Affairs supports the VAT cut and the expansion of eligible beneficiaries, calling it a timely measure to support businesses, stabilize the macroeconomy, and help reach the 8% growth target.

Experts from the Asian Development Bank (ADB) also view the VAT cut extension through the end of 2026 as a positive step. They recommend further measures such as income tax and fee reductions and expanded social spending to strengthen domestic demand amid global economic uncertainties.  – Source: VOV