Why only reduce tax 10% to 8%?
1. To stimulate demand
Discounts for consumers, but businesses do not directly benefit. When people consume and shop more, it will help businesses consume, sell better, and stimulate production. However, in order to stimulate demand, it is necessary to see which goods need to stimulate demand, not all goods.
Encourage consumption with items essential to life. As for non-essential goods, products subject to excise tax or luxury goods, consumption demand should not be stimulated.
2. Promote economic recovery
Consumers will be able to reduce the part they have to pay for the State budget, thereby stimulating consumers to spend more, which will stimulate demand indirectly, promoting the economic recovery.
The reduction of VAT will be more effective when the economy has basically returned to a normal state, and industries have developed again. For some industries with weak demand due to the prolonged Covid-19, such as the service industry, tourism… the impact of VAT reduction will not be much. Because many tourist areas reduce prices, but people are still afraid of the disease, so they do not dare to go. Of course, looking at the overall scale, the reduction of VAT will stimulate demand, businesses will sell more goods, the spread is greater.
3. Adding added value to production
Making the following production cycle to reduce input prices, reduce intermediate costs, thereby increasing added value for production of enterprises. Reducing taxes is very good, especially reducing indirect taxes such as VAT that will go into production, while reducing direct taxes will not go into production.
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