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The draft Law on Value-Added Tax (amended) and the draft Decree guiding the detailed implementation of the Law on Value-Added Tax (amended) are currently under review by the Ministry of Finance. This draft proposes applying a 10% VAT tax to most exported services (except for some specifically regulated services).
If Vietnamese exported services are subject to a 10% VAT tax, it will make service providers for international markets struggle to compete with counterparts from other countries. According to the proposal, most exported services will be subject to a 10% VAT tax instead of being tax-exempt as before.
Many opinions suggest that if regulations like the proposed one are adopted, it not only lacks fairness but also reduces the competitiveness of Vietnamese businesses in the international market. VASEP (Vietnam Association of Seafood Exporters and Producers) stated that this proposal is unreasonable and increases costs, reducing the competitiveness of exported goods compared to other countries.
Implementing this tax will disadvantage export businesses, reduce their competitiveness against competitors in other countries, thereby decreasing export turnover, diminishing attractiveness in attracting offshore investment, and creating additional complex tax procedures.
The proposed regulations do not align with Vietnam’s orientation, especially when the country is focusing on promoting exports since becoming a net exporting country in 2015. Currently, amidst trade surpluses, exported services are facing difficulties, even deficits. Therefore, to promote exported services, Vietnam should not impose taxes, and the proposed amendments should be reconsidered, revised, or postponed for implementation after a few years.
The service sector plays a crucial role in changing Vietnam’s economic structure, increasing the proportion of service and industrial exports in Vietnam’s total export turnover. This implies that exported services should be the top priority.
In fact, exported services have significant potential for development. In 2023, Vietnam’s export turnover of services reached around $20 billion, with an average annual growth rate of about 11%, higher than the GDP growth rate. Additionally, exported service activities usually do not require large investment capital, suitable for Vietnam’s economic conditions.
Clearly, exported services are one of the strong sectors of Vietnamese businesses. Especially in the digital economy context, exporting financial services, accounting services, etc., is crucial.
If we can exploit potential, organize, seek resources, and cooperate, our exported services will develop in the future. However, applying a 10% VAT tax to exported services will reduce the competitiveness of foreign service providers in Vietnam, leading to the loss of Vietnamese businesses’ competitiveness and encouraging Vietnamese investors to seek investment opportunities abroad. This not only loses tax revenue but also foreign currency reserves.
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