Finance Minister Nguyen Van Thang presented the proposal during the ongoing National Assembly session, detailing the draft resolution to continue the VAT rate reduction from 10% to 8% for most goods and services, except for certain excluded categories.

If approved, the tax cut will be in effect from July 1, 2025 to December 31, 2026.

The policy is part of Vietnam’s broader strategy to support its economic and social development goals for 2025, including a targeted GDP growth rate of 8% or more. It also serves as a foundation for achieving double-digit growth in the 2026–2030 period.

Vietnam first introduced the 2% VAT cut in 2022 to aid post-pandemic recovery, and it has since been extended multiple times. According to Minister Thang, the reduction has proven effective in lowering production costs, increasing profits, and stimulating consumer demand.

Under the current draft, the VAT reduction will not apply to sectors including telecommunications, financial services, banking, insurance, securities, real estate, metal products, mining (excluding coal), and items subject to special consumption tax (except for gasoline).

The Ministry of Finance estimates the tax cut will reduce state revenue by approximately 121.74 trillion VND (~$4.8 billion USD) over the proposed period - 39.54 trillion VND in the second half of 2025 and 82.2 trillion VND in 2026.

Minister Thang affirmed that despite short-term revenue losses, the VAT cut would contribute to macroeconomic stability, encourage business expansion, and create jobs, ultimately delivering long-term economic gains.

For consumers, the 2% VAT reduction translates into lower prices on goods and services, helping ease household spending. For businesses, it cuts input costs, improves profit margins, and enhances competitiveness.

The National Assembly’s Economic and Financial Committee has agreed in principle with the proposal, recommending further refinement of the draft resolution to ensure smooth implementation and alignment with long-term fiscal goals.

Tuan Nguyen