Mid term report major international business economics value added tax

2.3.3 VAT ensures stability of the state budget and protects as well as improves 2.4.1 Changes in incomplete and unclear regulations on goods and services 2.4.2 VAT payers and complicate

FOREIGN TRADE UNIVERSITY

HO CHI MINH CITY CAMPUS

MID-TERM REPORT Major: International Business Economics VALUE ADDED TAX

Members: Pham Dinh Tuan

Le Kim Khanh Tran Thuy Linh Chu Nguyen Hong Quyen

Vu Que Anh Duong Thanh Nhi

Ho Chi Minh City, July

TABLE OF CONTENTS

CHAPTER |: VALUE ADDED TAX OVERVIEW 3 1.1 Value Added Tax overall 3 1.2 The roles of Value Added Tax 3 1.3.1 Avoiding tax avoidance and tax evasion 3 1.3.2 Increasing the Government’s budget and improving the tax policy 4 1.3.3 Encouraging the investment, export, and growth 4 CHAPTER 2: VALUE ADDED TAX IN VIET NAM 5 2.1 Overview of Value Added Tax in Viet Nam 5 2.1.1 Classifications of Value Added Tax in Viet Nam 5 2.1.2 Characteristics of Value Added Tax in Viet Nam 5 2.1.3 Current tax rate of Value Added Tax in Viet Nam 7 2.2 Current Legislation on Value Added Tax in Vietnam 8 2.2.1 Law on value- added tax No 13/2008/QH12 8 2.2.2 Law on amendments to the law on Value added tax No 31/2013/QH138 2.2.3 Law amending the Law on Taxation 2014 No 71/2014/QH13 9 2.2.4 Amending and supplementing a number of articles of the Law on Value Added Tax, Law on Special Consumption Tax and Law on Tax Administration

2.2.5 Decree 209/2013/ND-CP 11 2.2.6 Circular 181/2013/TT-BTC of the Ministry of Finance, 2013 II 2.2.7 Circular 219/2013/TT-BTC 12 2.2.8 Decree No 15/2022/NĐ-CP 12

2.3.3 VAT ensures stability of the state budget and protects as well as improves

2.4.1 Changes in incomplete and unclear regulations on goods and services

2.4.2 VAT payers and complicated tax rates 16 2.4.3 Tax accounting documents and tax calculation methods are complicated and many steps are still complicated 17 2.4.4 Difficulties in tax deduction and refun 18 CHAPTER 3: COMPARISON OF VALUED ADDED TAX BETWEEN

3.1 Rationale for studying VAT in China 20 3.2 Comparison: VAT in China versus Vietnam 20

3.3 Implications and findings 23 3.3.1 The impacts of China’s Value-Added Tax Reform 23 3.3.1.2 Problems with the new system 25 3.3.2 Implications and finding for Vietnam VAT policy 25 3.2 Comparison of Value-Added Tax between Vietnam and Russia 27 3.2.1 Rationale for studying VAT in Russia 27 3.2.2 Comparison: VAT in Russia versus Vietnam 28 3.2.3 Implications and findings 29 CHAPTER 4: RECOMMENDATIONS 31 4.1 Adequate and clear regulations should be issued to determine taxable

4.2 A roadmap should be specified to apply a uniform and stable tax rate with economic conditions in each period so that taxpayers can easily comply 31 4.3 Coming up with methods to identify tax evasion tricks and have serious penalties to prevent tax fraud 32 4.4 Tax Calculation Reforms 32 4.5 Improve the organization of tax collection and promote propaganda and

REEERENCES

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In a research covering the years 2006-2019, the Viet Nam Institute for Economic and Policy Research (VEPR) found that Value Added Tax (VAT), which accounts for 50%-60% of all tax income, is one of the key sources of the country's budget Due to the Covid-19 outbreak and the subsequent economic crisis, the value added tax played an even larger role According to Decree No 15/2022/ND-CP, which governs tax reduction and exemption policies, the government provides tax relief year 2022 In order to promote the socio-economic recovery and development following the pandemic The VAT was reduced from 10% to 8% from 1 February

2022 to 31 December 2022 Consumers may not be aware of the 2% adjustment in the VAT rate, but it will have a significant impact on government income and the socioeconomic development objectives for the years 2021-2030 In order to properly understand the potential implications of the upcoming reform on the structure of Vietnam's tax system and on society as a whole, it is essential to first analyze the VAT situation in Vietnam

2, Objectives

The goal of this research is to combine theoretical concerns and practices related to VAT, examine the present environment, and assess it using real-world examples In order to forecast future VAT trends in Vietnam and calculate their economic effects, the research also looks at VAT trends throughout the world The following real-world concerns are clarified by this assignment:

¢ Current Legislation on Value Added Tax in Vietnam

« Achievement and issues of Value Added Tax in Vietnam

* The comparison of VAT In the world and Vietnam

3 Contribution

In order to provide a complete picture of the present state of the VAT system

in Vietnam, this study clarifies and summarizes many aspects of the VAT system The study also analyzes the gaps between theory and practice regarding VAT in Vietnam and offers suggestions for future VAT to enhance the VAT law

In other words, this research produces suggestions for future tax system reform that might be effectively put into place and achieve the objectives of compatibility with other countries' tax systems and economic integration

CHAPTER 1: VALUE ADDED TAX OVERVIEW 1.1 Value Added Tax overall

VAT stands for Value Added Tax Some nations refer to VAT as a goods and services tax, or GST Sales tax is the source of VAT, and France was the first nation

in the world to pass the Value Added Tax Law in 1954

The VAT was first introduced in France and is now extensively used in numerous nations About 130 nations, including Vietnam, have formally implemented VAT as of this writing

Every point in the supply chain where a product gains value is subject to VAT, which is a kind of tax imposed on the sale of products and services On both domestically produced items and those that are imported, VAT is charged

1.2 The roles of Value Added Tax

VAT has a broad adjustment range that includes all products and services utilized in Vietnam for production, commerce, and consumption The following are the implications of VAT:

1.3.1 Avoiding tax avoidance and tax evasion

VAT is adopted to decrease tax evasion and improve the standardization and transparency of the tax payment process

The VAT system does not provide exclusions Increasing compliance and reducing potential for fraud are provided by taxing each stage of the production process separately Taxing all items demonstrates the fairness of taxation Additionally, it shows how much the State values all societal consumption The government will either not tax or tax at the lowest rate when it is necessary to encourage consumption or limit consumer tax payments

Additionally, the VAT charge will vary depending on the stage Because of the various VAT rates, it will be impossible for buyers to know how much VAT they would actually have to pay and so avoid paying it

When administered properly, VAT is a key instrument for the country's tax consolidation and, as such, helps to partially address the fiscal deficit issue

1.3.2 Increasing the Government’s budget and improving the tax policy

A crucial source of money for the government's budget is the VAT The state budget receives a sizable and largely consistent amount of money from the VAT The VAT is a mechanism to secure a sizable, consistent, and timely source of revenue for the State budget, strengthening national finances, assuring resources for socioeconomic development, eradicating hunger, reducing poverty, and consolidating security and defense

Additionally, VAT assists in honing the system of taxation, bringing it gradually into line with international standards, and fostering our nation's economic integration with the rest of the world and the area

1.3.3 Encouraging the investment, export, and growth

Exporters will get a particular deduction for the input VAT they paid on items used in the manufacture and sale of taxable goods and services The exporters

do not have to pay tax while exporting and receive a complete refund of the input tax since the exported products and services are subject to 0% tax or a very low rate

of tax

When a project has no output goods, VAT on investment assets is regularly returned; otherwise, it will be tmmediately subtracted from the project's budget Therefore, the VAT has good impacts on promoting company growth, investment, production, and exports

Additionally, value-added tax has the result of controlling both businesses' and individuals’ income The VAT supports and promotes business subjects to be more self-aware and to develop their business accounting, adopt accounting procedures, maintain invoices and documentation, and contribute to the battle against tax evasion and smuggling

CHAPTER 2: VALUE ADDED TAX IN VIET NAM 2.1 Overview of Value Added Tax in Viet Nam

2.1.1 Classifications of Value Added Tax in Viet Nam

The management of a firm's capital goods informs the choice of VAT type The essential issue in the investigation of different forms of VAT is whether input tax paid for capital items is permitted or not

There are three types of VAT, they are:

* Consumption type

* Income type

* Gross National Product (GNP) type

1 Consumption Type VAT

In the case of consumption-type VAT, all capital assets acquired from other businesses are not included in the tax base in the year of purchase, and depreciation

is not subtracted from the tax base in later years Consumption serves as the tax base because investments are exempt from taxation under this system

2 Income Type VAT

Income category Capital goods acquired from other businesses and subject to VAT are subject to taxation in the year of acquisition However, this kind does not use depreciation for determining the tax base for next year Both consumption and net investment are subject to the tax The net national income serves as this sort of tax's tax base

3 GNP Type VAT

This kind prohibits a company from deducting capital goods it buys from other companies from its tax base in the year of purchase Depreciation deductions from the tax base in later years are likewise not permitted Both consumption and gross investment are subject to tax GNP serves as the basis for this form of tax

It is common to apply consumption-based VAT Therefore, when we refer to

"VAT," we primarily imply the consumption kind of VAT

2.1.2 Characteristics of Value Added Tax in Viet Nam

* VAT is an indirect tax The purchaser, transferee, or lessor of the goods, property, or services will be subject to VAT, an indirect tax Although the tax is due from the seller, it may be transferred to the purchaser, transferee, or lessee of the goods, property, or services, and they will be responsible for paying the VAT instead of the seller At the time of its implementation, this legislation will also be applicable to any pending leases or sales of goods, properties, or services VAT is a total tax collected by a standard ratio at a single rate across the country, unlike other countries that employ several

rates

* VAT is a broad-based tax The value that each business adds to a thing at all stages of manufacturing and distribution is included in the VAT In addition, VAT is assessed on a variety of products and services

* VAT 1s a consumption tax Because the customer will be responsible for paying the whole tax, VAT is a consumption tax The complete VAT must be paid when acquiring goods; earlier in the production process, buyers are refunded for whatever taxes they have previously paid

* VAT is a percentage tax The main characteristic that sets VAT apart from other indirect taxes is the ad valorem tax The actual tax burden is evident at every level of the production and distribution chain, from the manufacturing process through the circulation of products and even the consuming phase, because VAT is levied as a precise proportion of the product's price Taxes are only levied on the value that is added, not the whole cost of the goods and services

¢ VAT is collected fractionally with different rates at each stage

A taxable person may deduct from the VAT they have recetved the amount of tax they must pay to another taxable person on a purchase made for business purposes Furthermore, VAT is charged at every stage from manufacturing to consumption, as was already explained The VAT rate varies depending on the

stage A value-added tax amount is a number from production to circulation, and this number differs from the amount of value-added tax from circulation to consumption Consumers will pay and endure the consequences of the total tax paid

at the major stages, which is the ultimate tax on the complete worth of products and services

¢ VAT is a multi-stage tax Every stage of the creation of products and services that entails a purchase is taxed with VAT VAT is specifically levied on goods and services from the point of initial production to the point of sale at every stage in the supply chain where value 1s added

¢ VAT has a wide range of taxpayers VAT will apply to almost all items in society Taxes are fair since they are levied on all items It also demonstrates how the State feels about all forms of consumerism in society The State will either not tax or tax at the lowest rate when it

is required to promote consumption or restrict consumer tax payments

2.1.3 Current tax rate of Value Added Tax in Viet Nam

The VAT law applied in Vietnam distinguishes 3 different tax rates: 0%, 5%, 10% applied to each group of manufactured or imported goods The regulation of different tax rates represents the policy of regulating income and guiding consumption for goods and services In the current conditions in our country, the business premises of the industries are not uniform, so it is necessary to distinguish different VAT rates for each group of goods

¢ The tax rate of 0% applies to exported goods and services: processed exports, and goods and services that are not subject to export VAT

+ The tax rate of 5% applies to goods and services: clean water for production, domestic use, fertilizers, ores for fertilizer production, machinery and specialized tools for medical use, cotton, and sanitary napkins medical students, teaching and learning materials, children’s toys, crop and Itvestock products, aquatic products, unprocessed caught seafood, fresh food, food, and forest products

* The 10% tax rate applies to goods and services: petroleum, gas, electricity ore, commercial products, electronics, chemical products, garments, embroidery,

shoes, milk, confectionery, water beverage, ceramic and glass products, legal consulting services, other consulting services, hotels, catering services

2.2, Current Legislation on Value Added Tax in Vietnam

2.2.1 Law on value- added tax No 13/2008/QH12

The introduction of value-added tax No 13/2008/QH12 has marked a new development in Vietnam's value-added tax policy This document was issued by the National assembly in Hanoi 2008 The National Assembly passed it on June 3,

2008, and took effect from January 1, 2009 The value added tax includes 16 articles which include general provision, tax based and tax calculation method, tax credit and refund and also about the implementation of these provisions This document is signed by the General Secretary of the Communist Party Neuyen Phu Trong It replaced the law on Value added tax 1997 and Law amending and supplementing a number of articles of the Law on Value-Added Tax No 07/2003/QHI11; besides, Article 2 of the Law amending and supplementing a number of articles of the Law on Special Consumption Tax and the Law on Value Added Tax No 57/2005/QH11 were annulled by this document

2.2.2 Law on amendments to the law on Value added tax No 31/2013/QH13 After a period of time since the promulgation of the 2008 VAT law, the law has revealed a number of limitations that cause difficulties in the implementation of typical laws such as unclear regulations on non-taxable objects and taxable prices, tax calculation or tax registration threshold etc Therefore, the National Assembly of the Socialist Republic of Vietnam promulgated additional and revised laws such as the 2013 Amended Value Added Tax Law No 31/2013/QH13 with the promulgated date of 19 June, 2013, and is effective from | January 2014, signed by Mr Nguyen Phu Trong with 13 amendments and supplements

For example, about Life insurance, the law on VAT stipulates that “7 Life insurance, health insurance, insurance for students, other insurances related to humans, insurance for animals, insurance for plants, other agricultural insurances; insurance for boats, ships, and other equipment necessary for fisheries; reinsurance

The Law on Insurance Business 2010 has separated health and human accident insurance from the non-life insurance sector into health insurance of three types: personal accident insurance, medical insurance and life insurance health care However, in recent years, businesses have deployed insurance services for fishing vessels, especially offshore fishing vessels to limit property risks This type

of insurance is currently being encouraged by the state to insure the risks caused by fishermen currently operating in important waters

Therefore, in order to comply with the insurance business law and ensure the uniformity of the legal system and also to encourage insurance services for fishermen, this law stipulates the type of insurance products related to the insurance business People, agricultural insurance and insurance for ships, boats, equipment and other necessary tools for direct fishing are not taxable in Clause 7 Article 5 of the Law on VAT

2.2.3 Law amending the Law on Taxation 2014 No 71/2014/QH13

The 2014 revised tax law passed by the National Assembly on November 26,

2014 is a law amending and supplementing many laws such as: Law on corporate income tax 14/2008/QH12, Law on personal income tax 04/2007/ QH11, value added tax 13/2008/QH12, natural resource tax law 45/2009/QH12 In this law, we can realize new points on value-added tax such as the transfer of fertilizers; fodder, poultry and other pet food; specialized machinery and equipment for agricultural production from subject to tax rate of 5% to non-taxable objects This Law takes effect from January 1, 2015 and abolishes regulations on exchange rates when determining revenue, expenses, taxable prices, taxable incomes, taxable incomes and taxes paid to the state budget country in: Clause 3, Article 7 of the Law on Value-Added Tax No 13/2008/QH12, which has been amended and supplemented with a number of articles under Law No 31/2013/QH13

2.2.4 Amending and supplementing a number of articles of the Law on Value Added Tax, Law on Special Consumption Tax and Law on Tax Administration

No 106/2016/QH13

A number of provisions of the Law on Value Added Tax, the Law on Special Consumption Tax, and the Law on Tax Administration were amended and supplemented by Law No 106/2016/QH13, which was enacted by the National Assembly on April 6, 2016 Among the recent highlights are:

Firstly, 02 items that are exempt from value-added tax:

- Services for the aged and the disabled

- Products that are exported are items that have been processed from natural resources and minerals, with at least 51% of the product's cost coming from the combined value of those resources and minerals and energy expenses

Law No 106/2016/QH13 removed Regulation No 01 on Value-Added Tax Refund, notably the provision of VAT Refund, concurrently with the inclusion of goods not subject to Value-Added Tax when the initial value-added tax amount is still there but the unaudited value-added tax amount has accumulated after at least a year from the first month or at least four quarters from the first quarter, respectively According to the existing Law on Value-Added Tax, the business establishment is entitled to a tax return if the input has not been subtracted

Secondly, specific rules regarding VAT refunds when an organization exports products and services:

Unless goods are imported for export or exported goods are not exported in the area of customs operation in accordance with the provisions of Law No 106/2016/QH13's Clause 3, Article 1, a business establishment that exports goods and services in a month or a quarter will be reimbursed for value-added tax on a monthly or quarterly basis if its input value-added tax amount has not yet been deducted from 300 million VND or more

Taxpayers who manufacture exported products without breaking the law on tax and customs for two years in a row should process their tax refunds first and review them subsequently, under the terms of the Law on Tax Administration Thirdly, more specific rules on the situations in which businesses with investment projects can and cannot get their VAT returned

Fourthly, law No 106/2016/QH13's provision that the penalty for late tax payments is merely 0.03% per day computed on the late payment tax amount is noteworthy

2.2.5 Decree 209/2013/ND-CP

This Decree is issued by the government to detail and guide the Law on Value Added Tax 2008 “This Decree was promulgated on December 18, 2013 and took effect from January | 2014 and replaced Decrees No 123/2008/ND-CP dated December 8, 2008 and No 121/2011/ND-CP dated December 27, 2011 of the Government detailing and guiding the implementation of Articles of the Law on Value Added Tax

To annul Clause 1, Article 4 of Decree No 92/2013/ND-CP dated August

13, 2013 detailing the implementation of a number of articles effective from July 1,

2013 of the Law amending and supplementing a number of articles Articles of the Law on Corporate Income Tax and the Law amending and supplementing a number

of articles of the Law on Value-Added Tax from the effective date of this Decree.” This Decree includes 12 articles and guides issues in the value-added tax law, such as general regulations on taxpayers, tax calculation methods, tax refund provisions, etc

2.2.6 Circular 181/2013/TT-BTC of the Ministry of Finance, 2013

This Circular takes effect from January 17, 2014, replacing Circular No 123/2007/TT-TBC dated October 23, 2007 of the Ministry of Finance to guide the implementation of tax policies for programs, the project uses official development assistance (ODA) and concessional loans from donors This Circular includes general provisions on the scope of regulation, subjects of application, etc For

chapter 2, section | will specify tax policies, tax incentives and tax refund procedures applicable to non-refundable aid ODA projects, section 2 will be about tax policies and incentives on tax applicable to ODA loan projects and concessional loan projects Section 3 is about tax policy and tax incentives for projects funded by various forms of funding and the last chapter is about implementation organization Because capital sources currently play a rather large and important role in the economy, along with taxes applied to ODA projects and projects using concessional loans from donors according to the guidelines This circular includes value-added tax, so it can be said that this circular is an important circular in the value-added tax document system

2.2.7 Circular 219/2013/TT-BTC

This Circular takes effect from January 1, 2014, replacing Circular No 06/2012/TT-BTC dated January 11, 2012 and Circular No 65/2013/TT-BTC dated May 17/ 2013 by the Ministry of Finance This document is to guide the value- added tax law 2008 and decree 209/2013/ND-CP This Circular clearly stipulates important issues in the calculation of value-added tax on Taxable objects, non- taxable objects, tax bases and methods, VAT withholding, tax refund and place of payment

2.2.8 Decree No 15/2022/ND-CP

Decree No 15/2022/ND-CP dated January 28, 2022 stipulating tax exemption and reduction policies according to Resolution No 43/2022/QHI5 of the National Assembly on fiscal and monetary policies to support the recovery program and socio-economic development takes effect from February 1, 2022 and applies to the corporate income tax period of 2022 This decree was issued by the government and signed by deputy prime minister Le Minh Khai This Law provides for reduction of value-added tax, deductible expenses when determining income subject

to corporate income tax and its effect In addition, this decree also lists the list of goods and services that are not eligible for value-added tax reduction

2.3 Achievement

2.3.1 The Government of Vietnam has successfully implemented a number of solutions to support enterprises and residents affected by the Covid-19 epidemic

On January 28, 2022, the Government issued Decree No 15/2022/ND-CP, stipulating a policy to reduce the VAT rate by 2% from February 1, 2022 to the end

of December 31, 2022 for for groups of goods and services that are applying the VAT rate of 10% (to 8%) according to Resolution No 43/2022/QHI5 of the National Assembly on fiscal and monetary policies to support the Recovery Program and Social Economic development

When an economy is in trouble, to stimulate consumption of the residential sector, one of the short-term fiscal policies is to reduce VAT In principle, a reduction in VAT will reduce the final price of goods and services that consumers have to pay In other words, the consumer will buy more than the same amount before, or the same quantity or service, for less money And cheaper goods and services is one of the important reasons for the increase in consumption motivation, the domestic pepper price index has a better outlook and recovery

This support from the Government had stimulated consumption and increased production, creating conditions for businesses to maintain and restore production and expand business This also created jobs for workers, contributed to lowering the unemployment rate, and restoring the economy after the impact of the COVID-19 epidemic and from there, stimulating consumer demand, stimulating people to shop and spend more When the consumption of goods increased, the production and business activities of enterprises were promoted As a result, production output increased, GDP increased significantly ( 7%), exports and imports both increased dramatically in the long term ( 23.6% and 21.8%), exports grew more than imports, and the trade balance tended to be in surplus Therefore, businesses could reduce costs thanks to reduced input VAT, consumers could buy cheaper goods and save 2% in consumption, so consumption was stronger, the state budget did not decrease, but on the contrary increased 4.3% in the long term

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On the other hand, from a macro perspective, the policy of reducing VAT by 2% also had an impact on curbing the increase of the consumer price index (CPI) The tax reduction also created a large amount of capital (according to the Ministry

of Finance's calculation, it is over 49 trillion VND) for businesses and business households to invest in expanding production, creating added value for the economy but the State did not have to directly inject money, helping to control inflation and maintain macroeconomic stability

Thus, the promulgation of policies to reduce VAT rates not only increased people's welfare, stimulated consumption demand, promoted investment, and removed difficulties for businesses, but also helped the Government achieve the goal of restoring the economy after the impact of the Covid-19 epidemic

2.3.2 The VAT system has always been researched and improved effectively, contributing to stabilizing the domestic economy and being suitable for the context of international economic integration

For the domestic market and specifically, for value-added tax, in order to stabilize the tax rate, the Government has proposed to expand the tax base by reducing the group of goods and services that are not subject to value-added tax and the group of goods and services subject to the tax rate of 5%; proceed to basically apply a single tax rate; study the increase in value added tax rate according to the roadmap; research and uniformly apply the tax calculation method according to the percentage of revenue for taxpayers whose turnover is below the threshold or are not eligible to apply the deduction method

In addition, regulations related to value-added tax on exported goods and services were passed, ensuring that they reflect the true nature and international practices, examine and modify policies, supplement regulations on tax deduction and value-added tax refund in the direction of simplicity, transparency and synchronization with relevant provisions of law

According to Clauses | and 2, Article 14, Chapter III, Circular No 78/2014/TT-BTC stipulatnp the implementation of VAT incentives for the education sector, service activities and technical assistance for scientific research

and technology development, Technology transfer, standards, technical regulations, metrology, product quality, goods, radiation safety, nuclear and atomic energy, The activities related to intellectual property In addition, income from the performance

of a contract for scientific research and technological development in accordance with the law on science and technology is exempt from tax during the contract performance

For foreign investors, According to Article 5 of Circular 219/2013/TT-BTC, the program or project owner or main contractor or organization appointed by the foreign sponsor to manage the program, ODA projects, when receiving support funds to realize the goals of the ODA project, are not required to declare and pay VAT, or do not have to issue an output VAT invoice and receive a refund of their input VAT of goods and services purchased in Vietnam to serve the program or project

Attracting foreign enterprises (FDI) to invest in Vietnam is a major policy of our Party and State during more than 30 years of renovation Along with the change

in tax policies for domestic and foreign products, the tax policy has made a positive contribution to attract FDI enterprises to invest in Vietnam and is adjusted depending on economic conditions - specific society, contributing step by step to bring Vietnam forward on the path of economic development and global Integration

2.3.3 VAT ensures stability of the state budget and protects as well as improves people's lives

It can be seen that taxes in general and value-added tax in particular bring great roles and benefits to socio-economic development and are the main source of state budget revenue today

Firstly, Value-Added Tax creates a large and stable source of revenue for the state budget, thereby stabilizing the socio-economy and promptly having capital to handle economic downturns caused by objective factors

Secondly, for goods and products imported from abroad to Vietnam, they are taxed with relatively high value-added tax, in which exported goods enjoy a tax rate

of 0%, contributing to the protection and promotion of domestic production as well

as domestic trade In addition to being refunded VAT, investment projects with export value exceeding 30% of the total value of goods are also entitled to a preferential corporate income tax rate of 25%, if the value of exported goods is outstanding over 50% of the total value of goods is exempt from additional corporate income tax, thus creating capital conditions for export businesses to operate

Thirdly, the taxation of value-added tax has a great effect in regulating the income of individuals and organizations when purchasing and consuming goods and services subject to value-added tax Value-added tax items with low tax rates create leverage for manufacturers to increase productivity and create more products and goods Thereby stimulating shopping demand, promoting economic development 2.4 Issues and problems

After more than 10 years of implementation, the Law on Value-Added Tax (VAT) and its sub-law documents on VAT have undergone many amendments, supplements and brought into play great effects in increasing State budget revenue and stimulating production growth However, besides the inherent advantages and results achieved, the implementation of the VAT Law also has shortcomings that need to be resolved

2.4.1 Changes in incomplete and unclear regulations on goods and services subject to VAT

In Decree No 15/2022/ND-CP, which stipulated the policy to reduce the VAT rate by 2% from February 1, 2022 to the end of December 31, 2022, the Government did not stipulate a simultaneous reduction of VAT to 8% for all goods and services and instead, it provided an exclusion list of dozens of pages, for goods and services that are not subject to reduction These lists of goods still maintain the 10% tax rate, which is detailed in 3 appendices attached to Decree No 15 Some businesses said that they did not know if their business items were on the list of goods and services that are not eligible for value added tax reduction Enterprises face difficulties in looking up business code and HS code when importing goods

and materials In the process of tax declaration and imposition, the accountants of some enterprises have difficulty in reviewing, comparing and inspecting goods 2.4.2 VAT payers and complicated tax rates

Currently, the regulations that even small-scale business registration households and low sales are subject to VAT are causing great difficulties for tax officials and local tax authorities, and tax collection efficiency is very low In addition, the application of 3 tax rates: 0%, 5%, 10% and the criteria for demarcating the boundaries of applying the 5% and 10% tax rates is quite complicated: Both according to the name of goods and services, and according to the use of goods and services, and according to the nature of goods and services leading to the application of inconsistent tax rates, problems arising, and creating loopholes for fraud in the implementation process

2.4.3 Tax accounting documents and tax calculation methods are complicated and many steps are still complicated

2.4.3.1 Regarding tax accounting documents According to Article 4, Decree 15/2022/ND-CP, business establishments must prepare separate invoices for goods and services that are reduced Value added tax In case business establishments do not issue separate invoices for goods and services eligible for value-added tax reduction, they are not entitled to value-added tax reduction Thus, if the business only sells two items, it also has to issue two invoices

Then, while waiting for the tax authorities to have more detailed instructions 1n specific cases, many opinions said that "It’s better to have excess than lack", which means in some unclear cases, the tax rate will be applied 10% In practice, there are many difficult situations to solve when many accountants issue an invoice

of 10% but only later find out that the business 1s entitled to a tax reduction of 8%

In addition, the regulation that separate invoices must be issued for goods and services subject to VAT reduction to be applied at the tax rate of 8% as reflected by the business is to increase the cost of the enterprise (increasing the cost of goods and services, the time of accounting and the cost of using invoices) because for the