Thursday, April 25, 2024
26 C
Brunei Town

Vietnam to extend VAT cut until year-end to prop up slowing economy

CNA – Vietnamese lawmakers on Saturday approved a government plan to extend a reduction in value added tax (VAT) on goods and services until the end of this year to boost domestic consumption and production, as its export-driven economy faces headwinds from slowing global demand.

The VAT cut to eight per cent from 10 per cent, which has been in place since early last year, is not applicable to such services and products as banking, finance and real estate.

A vendor waits for customers in front of her lantern shop in Hoi An, Vietnam’s Quang Nam province. PHOTO: AFP

The country is trying to avert a slowdown in growth from weak demand in its key markets, after first quarter gross domestic product expansion slowed to 3.3 per cent from 5.9 per cent in the fourth quarter of last year. The regional factory powerhouse reported a 12.3-per-cent decline in exports in the first five months of this year, dragged by shrinking shipments of key products smartphones, electronics and garments.

A VAT cut is expected to boost domestic consumption to compensate for the sharp fall in exports.

The State Bank of Vietnam, the country’s central bank, has so far this year cut its policy rates four times by between 150 and 200 basis points to boost its economy.

It last cut the refinance rate to 4.5 per cent, the discount rate to 3.0 per cent and the electronic interbank rate to 5.0 per cent on June 19.