Vietnam's gov't shelves sweeping new tax hikes

By Ngan Ha   September 12, 2017 | 03:05 pm GMT+7
Vietnam's gov't shelves sweeping new tax hikes
A Vietnamese woman transports cooked cassava and potato for sale by a bicycle on a street in Hanoi. The government has said that in order for the country to reach its economic growth target of 6.7 percent this year, taxes should remain unchanged for now. Photo by Reuters/Kham

The proposed increases would make it harder for the country to hit its ambitious economic growth target this year.

The Vietnamese government has instructed the Ministry of Finance to put on hold a series of proposed tax hikes to make life easier for local businesses and the growth target more achievable.

The ministry is planning to increase a number of different taxes and fees, including raising value-added tax (VAT) from 10 percent to 12 percent.

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.

However, the government has said that in order for the country to reach its economic growth target of 6.7 percent this year, a goal that some experts say is unrealistic, taxes should remain unchanged for now.

Vietnam has been working hard to realize its growth target.

The central bank 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 many Vietnamese companies still rely heavily on bank loans.

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.

But outsiders view Vietnam's economic prospects a bit differently.

In July, HSBC revised down its previous forecast of 6.4 percent, saying the country’s economy is likely to grow by only 6 percent this year.

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.