Room for fiscal policy extension is more favorable than monetary policy

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1359 4429 o Ng Minh Tan - Room for fiscal policy extension is more favorable than monetary policy
Mr. Nguyen Minh Tan, Deputy Director of the State Budget Department spoke at the Forum.

Quick deployment, timely fiscal policy

Nguyen Minh Tan, Deputy Director of the State Budget Department, said recently, there have been many timely fiscal policies issued, thereby supporting the prevention and control of the pandemic and supporting the economy, including solutions and policies for budget collection; solutions and policies for budget spending and solutions and policies for the budget balance.

For the policy on collection, Nguyen Minh Tan said, in 2020, the Ministry of Finance submitted to competent authorities for promulgation according to its competence to extend policies, tax exemption and reduction of charges and fees to support businesses, households and individuals. Accordingly, the total tax amount and fees have been relaxed and reduced according to the policies issued in 2020, reaching about VND129 trillion.

In 2021, the financial package expected to support people and enterprises of about VND140 trillion. By October 31, 2021, the tax amount, land rent, fees and charges were exempted, reduced and extended by about VND96.9 trillion.

For spending solutions, Nguyen Minh Tan said the implementation of this solution in 2020 spent VND16.8 trillion, in 2021, the scale of resources for this solution was VND127 trillion.

For the solution and policies on budget balance, in 2020, the minimum cuts of 70% of remaining conference and work; save 10% more regular spending by 2020.

In 2021, carrying minimum cuts of 50% of the remaining domestic and foreign conference and work; save 10% of the other regular expenditure funding of 2021; recovering regular expenditures is not really necessary.

Accordingly, ministries, central and local agencies have made reductions and savings of budget expenditures in 2021 about VND20.67 trillion.

Assessing the positive aspects of fiscal policy, Nguyen Minh Tan said many policies and solutions were promptly issued, contributing to supporting and resolving difficulties and problems for enterprises.

Many policies were rapidly deployed, especially policies for exemption, reduction, extension of taxes and charges, helping to reduce financial pressure in the short term for people, businesses. This helps maintain production, ensuring good control of state budget, national financial security, and contributing to macroeconomic stability, ensuring social security; and implementing the “dual” target in 2020.

However, Nguyen Minh Tan said that policies are mainly to address short-term difficulties of enterprises and people; there are not many policies on demand, supporting domestic market development and supply chains.

The implementation of some policies is still slow, the rate of disbursement is low, not supporting people and enterprises. Exemption and reduction policies and extension of CIT payments have not removed difficulties for enterprises which were severely affected. Some policies have short implementation periods, have not created proactive calculations for businesses and people in accessing policies.

The room for expansion of fiscal policy is still quite large

At the forum, financial expert Can Van Luc said that Vietnam’s fiscal policy over the past two years has been demonstrated by strengthening fiscal discipline, controlling the state budget deficit and public debt. Accordingly, the budget deficit/GDP, public debt/GDP, government debt/GDP in 2020 will be at 3.5%, 43.5% and 38.6% respectively (according to adjusted GDP).

Along with that, strengthening fiscal support packages along with monetary support packages (exemption, reduction, extension of CIT, PIT, VAT, agricultural land use tax, registration fee for domestically manufactured cars, etc.).

Luc also pointed out some limitations and challenges in fiscal policy in recent years such as: the fiscal support packages are not large and wide enough; unsustainable budget revenue; coordination of fiscal, monetary and other policies needs to be further improved; the world economy and Vietnam are facing great challenges (potential bad debt, increasing inflationary pressure while recovery programs, support packages, and budget are still limited).

Regarding the fiscal policy, this expert said that there are many challenges ahead, on the one hand, it is necessary to step up support for the economy, on the other hand, to control inflation.

However, expert Can Van Luc said that the room to expand fiscal policy is still quite large and somewhat more favorable than monetary policy, specifically the state budget deficit and public debt were well controlled in the previous period, and it is still under control and lower than other countries in the region while the opportunity to increase domestic debt (through the issuance of government bonds) with low interest rates, low risks, creates room to increase budget spending for the government and economic recovery; the scale of fiscal support is still quite modest; major balances (budget/GDP deficit, public debt/GDP, debt payment/state budget collection obligations, inflation) are still within safe limits.

Accordingly, this expert recommends accepting an increase in public debt and budget deficit to supplement support packages; focus more on cash support, fee/cost reduction, credit guarantees, preferential loans (interest support) rather than tax deferral, debt repayment obligation.

Along with that, fiscal policy needs to be implemented quickly, neatly and effectively on the basis of strong application of IT, and at the same time linking the economic recovery program with the pandemic prevention and control strategy, the project economic restructuring, green economy development and circular economy.

This expert also proposed deploying more fiscal support and other support such as: continue to reduce VAT, promote loan guarantee of SMEs through guarantee funds for loans of SMEs in localities; support a part of input costs for businesses (such as reducing social insurance fees, trade union fees, support for testing costs, “3-on-the-spot” costs); invest in improving medical capacity, establish a fund for pandemic prevention and control, towards a national emergency fund; consider reducing electricity and telecommunications charges by 10% in 2022; provide funding (20-30%) for projects on upgrading and renewing technology of enterprises in a number of priority areas.

“The total new fiscal support packages is estimated at about VND400,000 billion, of which the actual expenditure is estimated at about VND240,000 billion (equivalent to 3% of GDP),” said expert Can Van Luc.

Along with that, speeding up the equitization and divestment of SOEs (striving to reach 80-90% of the plan), can earn about VND35,000 billion per year; increase the issuance of government bonds in the country; review non-budget funds and local funds; borrowing from international financial institutions (ADB, WB).

There is a need for plans and solutions to ensure macroeconomic stability (especially controlling inflation, prices, bad debts), ensuring fiscal stability. At the same time, promote institutional reform, dramatically improve the investment and business environment.

Agreeing with expert Can Van Luc on institutional reform recommendations, Dau Anh Tuan, Head of Legal Department, Vietnam Chamber of Commerce and Industry, said that administrative reform needs to be implemented more strongly.

“Although this is a small solution, it has a great effect, because the simplification and reduction of procedures and costs brings great efficiency and has a positive impact on production and business activities of enterprises in the near future. Therefore, it is necessary to continue to further promote administrative reform,” said Dau Anh Tuan.

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