New Proposal On Vat Changes: Positive For Budget Revenue, Moderately Negative For Consumption

■ Vietnam will raise its Value Added Tax (VAT) over the next few years to touch 12% in 2020 up from 10% today.
■ VAT is the largest source of revenue for the government (~21% of budget revenue in 2010-2016), and the new proposal could lead to a significant impact on budget revenue (1% of GDP).
■ The VAT increase could spur higher prices, reduce aggregate demand and increase income inequality.