Media: Vietnam proposes VAT cut to 8% to boost consumption and economic growth

Vietnam is working on a plan to cut its standard Value Added Tax (VAT) rate from 10% to 8%, a strategic fiscal intervention aimed at bolstering domestic consumption and shoring up economic momentum through 2025–2026.

According to local media reports, the proposal targets a 2% VAT cut on a wide range of goods and services used in production, business, tourism, and consumption. The move is designed to ease the cost burden on consumers and enterprises alike, ultimately boosting purchasing power, reviving domestic consumption, and fostering job creation.

Key sectors expected to benefit from the reduced VAT include information technology, fabricated metal products, refined petroleum, chemicals, imported coal, petrol, and oil. Notably, while the reduction excludes most natural resources and minerals, some critical production-related goods—such as certain mining and metal products—are included in the scope.

If approved by the Ministry of Finance, the policy will take effect from 1 July 2025 and remain in place until 31 December 2026. 

Authorities estimate the move could result in a fiscal revenue shortfall of approximately VND 121.74 trillion over the policy’s duration—VND 39.54 trillion in H2 2025 and a further VND 82.2 trillion in 2026. However, policymakers are betting on multiplier effects: lower consumer prices, reduced input costs for businesses, improved competitiveness for domestic products, and job creation through demand stimulation.

The VAT reduction forms part of a broader macroeconomic strategy to counter subdued domestic demand and provide cyclical relief amid external headwinds. If executed effectively, it could reinforce Vietnam’s post-pandemic recovery trajectory and enhance the resilience of its industrial and export base.