Vietnam's Tax Revenue Exceeds Target, Faces Challenges as India's Direct Tax Collections Rise; Thailand to Close Duty-Free Shops at International Airports; Economic Survey Shows GST Collections Drive Indirect Tax Revenue Growth in India; China Implements Phase IV of Golden Tax System to Crack Down on Tax Evasion

Vietnam's tax revenue for the year has exceeded the target by 1.7%, reaching VNĐ1,396 quadrillion (US$57 trillion). 29 out of 63 localities have completed their 2023 tax estimates. The General Department of Taxation reported that 16 out of 20 tax categories exceeded or completed the estimated amounts, and 8 out of 20 tax categories showed growth compared to the same period last year. The total amount of taxes and land rents subject to extension, exemption, or reduction was reported at VNĐ165 quadrillion. The tax sector has implemented an electronic tax filing system in all 63 provinces and cities, with 99.9% of businesses using electronic tax filing services. The tax authorities issued 17,751 decisions on value-added tax refunds, with a total refund amount of VNĐ135.8 quadrillion. However, the 2024 tax target of VNĐ1,486 quadrillion is expected to be challenging given the current business climate and difficulties [d7640d2e].

The Ministry of Finance (MoF) in Vietnam has proposed the reduction of 35 fees and charges across sectors such as securities, healthcare, citizen identification, and construction investment projects. The application period is from July 1 to December 31, with an expected reduction in State budget revenue of about VNĐ700 billion (US$29.2 million) [969b6070].

Prime Minister Phạm Minh Chính has issued a directive to implement solutions to increase access to credit capital, remove difficulties for production and business activities, and perform state budget collection tasks. The MoF has researched and proposed solutions for next year, including a 2% reduction in value-added tax and a reduction in the environmental protection tax rate for gasoline and oil. The ministry also plans to review and reduce export and import tax rates and reduce the collection of some fees and charges. Budget revenue has reached 85% by October 30, and the MoF will continue to implement solutions to improve tax administration and electronic invoicing [969b6070].

In addition, Vietnam's state budget revenue for the first nine months of the year was estimated to be over VNĐ1.2 quadrillion (US$50.8 billion), marking an 8.3% decrease compared to the previous year. The domestic revenue managed by the tax authorities in September reached VNĐ75.6 trillion, bringing the nine-month total to over VNĐ1 quadrillion, a 3.2% decrease year-on-year. To address the challenges faced in the final quarter, the sector will focus on increasing state budget collection, ensuring accurate and timely collection, and enhancing the recovery of overdue debts [3ea1bd3f].

The ASEAN+3 Macroeconomic Research Office (AMRO) has revised Vietnam's economic growth forecast for 2023 to 4.7% from the previous 4.4% [3ea1bd3f].

Vietnamese state-owned enterprises invested over US$6.6 billion in foreign ventures in 2022, while Vietnamese businesses prioritize diversifying their supply sources [3ea1bd3f].

The Finance and Budget Committee in the National Assembly (NA) of Vietnam agrees on the need to extend the 2% VAT reduction policy in the first half of 2024. The committee believes that the extension will support businesses and individuals. The VAT reduction policy was implemented in 2022 and has provided support of around VNĐ15.6 trillion ($650 million) from July to October 2023. The government has proposed continuing support measures for 2024 and has suggested a 2% VAT reduction for goods and services subject to a 10% rate from January to June 2024. The committee also emphasized the need for long-term solutions to boost GDP growth [adba2eff].

Vietnam's parliament is expected to approve a top-up tax for multinationals, raising the effective corporate tax rate to 15% from January. The move is in line with a global agreement led by the Organisation for Economic Cooperation and Development (OECD). Initially, Vietnam had planned to combine the tax approval with measures to compensate large foreign investors affected by the higher levy, but this separate resolution is not on the parliament's agenda. The new tax could reduce Vietnam's appeal among foreign companies if not accompanied by subsidies. The country's corporate income tax is currently set at 20%, but it has offered effective rates as low as 5% and zero-tax periods to large foreign investors. The new tax is expected to impact 122 foreign companies and generate an additional 14.6 trillion dong ($601.05 million) in tax revenue for the state annually [e85494b3].

Vietnam's parliament has decided to extend the reduction in value-added tax (VAT) on goods and services until the end of June 2024. The VAT cut from 10% to 8% was implemented in early 2022 to stimulate domestic consumption and production. Vietnam's exports have been affected by slowing global demand, with a 6.4% decline in the year to November 15. The country's economic growth is estimated at 5% this year, below the government's target of 6.5% and slower than the previous year's expansion of 8.02% [9819ff40].

India's net direct tax collections rose 20.25% year-on-year by February 10, reaching ₹15.6 lakh crore, constituting 80.23% of the revised estimates for direct taxes for this year. Net personal income tax collections grew at a rate of 26.91% so far this year, outpacing corporate income tax growth of 13.6%. The Finance Ministry hopes to meet the revised estimates of ₹19.5 lakh crore for the current year. Refunds amounting to ₹2.77 lakh crore have been issued between April 1, 2023, and February 10, 2024. Gross revenue collections from corporate income tax were 9.2% higher than a year ago, while revenues from personal income tax were up 25.7% [ff76ef2e].

The State budget revenue from export-import activities in the first two months of this year reached VNĐ56.42 trillion (US$2.35 billion), or 15% of the estimate, down 2.4% year on year, reported the General Department of Customs. Exports were estimated at $59.34 billion, up 19.2% annually while imports went up 18% to $54.62 billion, generating a surplus of $4.72 billion. The customs sector detected and handled 1,222 cases of customs law violations, with an estimated value of over VNĐ1.67 trillion; transferred eight cases to other agencies for legal proceedings, collecting VNĐ67.6 billion to the State budget. The sector has been assigned by the National Assembly to collect a State budget revenue of VNĐ375 trillion, with VNĐ204 trillion from export-import activities. The customs sector will continue to reform customs policies and procedures, ensure State customs management and combat trade fraud, and improve the effectiveness of fulfilling the tasks of safeguarding national sovereignty and economic security. It will also ensure the full legal basis for the building and launch of digital customs and smart customs models, thereby facilitating export-import businesses, promoting trade, and contributing to achieving economic growth targets [f95679df].

The State Budget (APBN) in April 2024 had a surplus of Rp75.7 trillion or 0.33% of GDP. State revenue decreased by 7.6% YoY to Rp924.9 trillion. State spending increased by 10.9% YoY to Rp849.2 trillion. Central government spending reached Rp591.7 trillion, up from Rp522.7 trillion last year. The growth in spending was mainly due to workers' Eid allowances. Thematic budgets included Rp173.4 trillion for education and Rp89.8 trillion for infrastructure. The new capital city spent Rp4.8 trillion in April. Tax revenues reached Rp624.9 trillion, import duties reached Rp15.7 trillion, and export duties reached Rp5.8 trillion. Export value in April grew by 1.7% to US$19.62 billion, while import value grew by 4.6% YoY to US$16.06 billion [5a27912d].

For every Tk100 mobile recharge, the government of Bangladesh takes Tk28. Previously, people would receive Tk75 as talk time and internet use for every Tk100 recharge, with the government receiving Tk25 as value-added tax (VAT), supplementary duty, and surcharge. Now, the government will receive Tk28. The increase in supplementary duty on mobile phone talk time and internet usage means mobile usage costs will increase by another Tk5. Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI), criticized the decision, stating that the country's telecom sector already has one of the highest tax rates in the world [c44ee419].

Duty-free shops in arrivals areas of international airports in Thailand will be closed to encourage more spending by visitors in domestic stores. The move is expected to generate up to THB3.5 billion (US$96 million) of new local retail spending a year. All three operators of inbound duty-free businesses have agreed to suspend operations at eight international airports. Statistics from the Customs Department show that sales from inbound duty-free shops totaled THB3.02 billion in 2023. The closure of inbound duty-free shops is estimated to raise foreign tourists' spending by THB570 per person each trip [7880feeb].

According to the Economic Survey 2024 in India, gross tax revenue in FY24 grew by 13.4%, with direct taxes increasing by 15.8% and indirect taxes by 10.6%. Net tax revenue exceeded budgetary estimates, growing by 19.1%. Revenue receipts of the union government increased by 14.5% in the previous financial year. The cost of collection of direct taxes reduced from 0.66% to 0.51%. Direct taxes accounted for 55% of gross tax revenue, while indirect taxes made up the rest of 45%. The survey also highlighted that GST has reduced logistics costs and travel time by up to 30%. The report calls for public policy action to boost competitiveness in the manufacturing sector [6c60526c].

China has implemented Phase IV of the Golden Tax System to crack down on tax evasion. The Golden Tax System is a tax IT administration and monitoring system in China. Phase IV aims to build an information-sharing system among financial institutions, taxpayers, and tax authorities. It will see a full digitalization of invoices, making it easier to spot tax irregularities and assess shell companies. Tax evasion remains a problem in China, leading to losses of 50.8 billion yuan in tax revenue. However, concerns over data privacy have arisen with the integration of Phase IV. Companies need to increase investment in technology and ensure compliance with legal requirements [9a0eeaeb].