Fiscal policy easing or debt financing solutions for development investment are not appropriate in the context that Vietnam tries to control inflation and public debt reaching the ceiling of 65 per cent of GDP, according to international experts.
Matthew Martin, director of the non-profit consultancy Development Finance International (DFI), said that Vietnam can get a great financial resource for achieving Sustainable Development Goals (SDGs) through expanding fiscal space.
Matthew Martin, director of the non-profit consultancy Development Finance International
In fact, there were several ways to relieve fiscal space, including expanding fiscal or monetary policies, borrowing more money or increasing budget.
At the conference on "State Budget Management Tools: International Experiences and Recommendations for Vietnam," DFI's director stated that Vietnam should focus on three main areas, namely restructuring budget expenditures, improving budget efficiency through transparent mechanisms and encouraging public participation in expenditure monitoring.
In addition, it is necessary to improve the efficiency of state budget collection by various solutions such as limiting tax fraud or abolishing unnecessary tax incentives.
Oxfam's "Assessing Vietnam's Tax Incentive Policies" research report published last year shows that Vietnam's tax incentives are still considerable and not direct as well as tax exemption and reduction have longer duration and broader scope compared to some regional countries.
Whereas, the investment decision of investors depends more on political and economic stability, tax legal framework, infrastructure, and labor cost, much less on tax incentives.
There is also lack of data, transparency and evidences of the cost and benefit of tax incentives. Generous tax incentives have contributed to reduction of state budget revenue, meanwhile Vietnamese citizens are facing a high burden of health expenditure and many impoverished by health cost.
Therefore, Vietnam is recommended to review and eliminate unnecessary tax incentives, minimize tax evasion and avoidance through monitoring mechanisms.
Dr Vu Sy Cuong, vice-dean of Financial Policy Analysis at the Academy of Finance, recommended the Vietnam government should focus on making mid-term and results-based finance allocation plans, requiring deeper collaboration amongst different ministries for common development goals.
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