3:34:40 PM | 11/2/2023
“The dynamic global economic landscape presents substantial challenges for Vietnam in shaping and executing our macroeconomic goals. In this context, our fiscal policy is approached with proactive flexibility, always taking national interests as the paramount goal,” Minister of Finance Ho Duc Phoc emphasized. Our reporter interviewed him on this topic.
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Impressive contribution of the fiscal policy
How do you evaluate the preferential policies on taxes, fees and charges to support people and businesses in recent times, as many business representatives said that tax extension and reduction policies have helped ease cash flows and helped grow businesses?
It is evident that the Government has exerted great efforts to support the economy with a series of fiscal and monetary policies in a reasonable and effective manner.
During the 5-year term (2021-2025), the Economic Recovery and Development Program launched by the Government early last year is an important highlight. To stimulate economic recovery and development, the fiscal support package plays a crucial role. We have implemented many policies to exempt, reduce and extend various taxes, fees, and budget incomes. In general, economic support policies have reached an unprecedented level in recent years, with the support value equal to 8.3% of the GDP, much higher than other countries with the same economic scale. Among them, fiscal policy plays a vital role.
The total value of support solutions was about VND129 trillion (US$5.5 billion) in 2020, VND145 trillion (US$6.2 billion) in 2021 and VND233 trillion (US$10 billion) in 2022. In 2023, to further assist businesses and people in overcoming difficulties to recover and develop the economy, the Ministry of Finance submitted to competent authorities a support package of VND196 trillion (US$8.3 billion).
In addition, the ministry advised the Government and the National Assembly to issue Resolution 43/2022/QH15 of the National Assembly on fiscal and monetary policies to support the socioeconomic recovery and development program after the COVID-19 pandemic, with a support package of up to VND347 trillion (US$15 billion).
Therefore, in the past four years (2020-2023), fiscal support packages amounted to VND700 trillion (US$30 billion), helping businesses, people and the economy to recover and grow faster. In 2023, within its authority, the Ministry of Finance issued a circular on the reduction of 35 fees and charges such as in securities, healthcare, citizen identification and construction investment project appraisal. With the effective period from July 1, 2023 to December 31, 2023, the amount of reduced fees and charges was estimated at VND700 billion (US$30 million).
Remarkably, after introducing a policy, the Ministry of Finance continuously conducted reviews and assessments. If people, businesses and the economy still faced difficulties, the ministry would promptly propose to extend its policies, based on careful consideration and calculation to ensure fiscal and budgetary stability.
Recognizing that difficulties and challenges outweighed opportunities and advantages although many industries and fields maintained recovery and had positive prospects and many business and economic support policies and solutions were working well, the ministry recently proposed financial policy solutions to stimulate aggregate domestic consumption demand.
Specifically, the ministry researched and proposed various solutions to reduce taxes, fees and charges in 2024 such as extending a 2% VAT reduction, cutting environmental duties on gasoline and oil as applicable to 2023, reviewing and reducing export and import tariffs to support domestic production and business, and lowering some fees and charges.
Institutional breakthrough - one of the growth drivers
You always prioritize and concentrate on addressing institutional obstacles and “treating business affairs as your own” by perfecting legal policies, enabling breakthroughs and innovations in financial and budgetary institutions. Could you please elaborate on this?
We must concur on the view that institutional breakthrough is the shortest path to rapid and sustainable development. Institutional improvement is one of the growth-driving pillars. Therefore, the Ministry of Finance remains steadfast in its goals and efforts to perfect institutions for further business development.
Adhering closely to practical requirements, the ministry has promptly proposed legal documents to remove difficulties for businesses and people, control inflationary and pricing pressures and support positive economic and social recovery and development.
Especially, in the context of the COVID-19 pandemic outbreak, many legal policies needed to be amended or promulgated to keep pace with reality and special circumstances. The Ministry of Finance urgently drafted policies to meet practical requirements. Many projects and programs that were previously not included in the policymaking agenda were introduced, amended and supplemented in a short time.
The ministry promptly introduced those programs and projects as rescheduled. All policies of the ministry are designed for people and businesses. For example, in 2020-2023, it actively proposed and submitted to competent authorities many solutions for the financial sector and resolved difficulties for them.
Typical solutions included extending, exempting and reducing taxes, fees, charges and land rents; exempting or reducing corporate income tax, personal income tax, VAT, import tax, environmental protection tax and many fees and charges.
The ministry submitted to competent authorities 56 legal documents (including 11 resolutions of the National Assembly and the National Assembly’s Standing Committee, 18 decrees of the Government, two decisions of the Prime Minister, and 25 circulars of the Ministry of Finance).
In the coming time, financial institution improvement will continue to be coupled with administrative procedure reform to facilitate people and businesses. Financial institutions will quickly adapt to international practices and meet integration requirements. Fiscally and budgetarily, upcoming institutional construction and improvement will further promote synchronous budgetary restructuring, including budgetary revenue and expenditure as well as public debt management as required in Resolution 07-NQ/TW of the Politburo.
It is essential to boost aggregate economic demand
Launching a series of fiscal solutions and extending and reducing many taxes, fees and charges are raising concerns about whether the completion of financial and budgetary tasks is affected since there are still many difficulties and challenges. What are your views on this?
Tax reduction support packages, particularly VAT, excise tax and environmental duties on gasoline, have effectively curbed inflation and supported business recovery and economic growth of Vietnam.
Another important achievement is that public debt and government-guaranteed debt remain at a sustainable level, staying around 36% of GDP in 2023 before falling to 34.4% in 2025, much lower than the threshold of 60% set by the National Assembly, a sustainable level as well.
Despite achieving many successes in administration, we must acknowledge that there will still be many difficulties from now until the end of the year. According to the resolution on 2023 budget estimates, the National Assembly decided that the total state budget revenue in 2023 is more than VND1,600 trillion (US$68 billion). However, due to economic difficulties, fulfilling revenue estimates is still challenging for the national budget and many local coffers, especially those with big takings from land and real estate business.
Meanwhile, the budgetary spending challenge is lower investment spending than planned. Investment spending plays a crucial role in the fiscal support package but disbursement progress is slow. Many investment expenditures from the socioeconomic recovery program have not yet been disbursed. Although the National Assembly’s Standing Committee has introduced many solutions, recurrent shortages of investment capital persist. This reality will exert strong impacts on economic growth in the 2023-2025 period.
I believe that special policies are needed in special circumstances. One law can be used to amend many laws and solve various bottlenecks.
Currently, the core is stimulating the aggregate demand of the economy. Therefore, fiscal policy is only one of the solutions to difficulties. It is necessary to implement consistent solutions such as applying monetary policies and investment policies, reforming administrative procedures and effectively improving the investment and business environment. There is a need to accelerate public investment disbursement, use public investment to lead private investment and activate all social resources.
In addition, it is essential to synchronously implement solutions to remove business difficulties for enterprises, especially in the real estate sector; and continue to enhance the business environment to attract foreign direct investment.
Furthermore, although the economy has recovered, exports have still slowed down and shrunk in some markets, creating significant pressures on Vietnamese businesses. Therefore, in the coming time, Vietnam needs to remove difficulties, expand markets and increase Vietnamese exports.
To do so, related agencies and sectors need to promote investment, connect supply and demand, find partners and develop potential export markets. In addition, it is necessary to continue to mobilize credit capital and other resources to support production and business beside fiscal solutions; reduce administrative procedures, remove difficulties for private investment, land, renewable energy and industrial projects.
I believe that effectively implementing the fiscal policy in 2023 in the context of a complex world and an economy that has not made breakthroughs with its growth model is a very challenging task. From now until the end of the year, the Ministry of Finance will deploy consistent solutions to collect the budget properly, fully and carry out fiscal solutions to support people and businesses.
In the coming time, in the 2024-2025 period, it is essential to continue adhering to the principle of active and flexible fiscal policy in the short term while complying with the principle of budgetary balance and financial discipline in the long term. The world is facing extraordinary changes, so we also need special response solutions.
The Government and the Ministry of Finance are monitoring domestic and international economic situations to adapt fiscal policies to solve economic difficulties on one hand and balance the state budget in the spirit of harmonizing benefits and sharing risks and difficulties between the state and businesses on the other.
Thank you so much!
Minh Hien