Hanoi (VNA) - Increasing value-added tax (VAT) does not help boost economicgrowth, but it can increase the poverty rate, said a report announced by the Vietnam Institute for Economic andPolicy Research (VEPR) under the University of Economics and Business - VietnamNational University in Hanoi on June 28.

Accordingto the report “Impacts of value-added tax on Vietnam’s economy and householdwelfare”, VAT plays an important role in Vietnam's economy.

Under a draft law proposed recently by the Ministry of Finance (MoF), the VATrate will be doubled to 20 percent.

Ass. Prof., PhD. Nguyen Duc Thanh, Director of VEPR, said raising taxes isalways a controversial issue in every country worldwide. Vietnam is nodifferent.

Thereport points to a number of findings that contribute more viewpoints to this debate,he said.

Thanh said the report predicts the impact of VAT increase on household welfare,which is measured by average expenditure and poverty rate.

According to PhD. Nguyen Viet Cuong from the National Economics University, inimpact on poverty, VAT can only affect low-income or near-poor families.

Households with high living standards will cut their spending, but this will notmake them fall into poverty, he noted.

Households with many members, a high proportion of children and elderly peopleaged 80 and above, and a high rate of labourers, are most affected by poverty. Thosespecialising in agriculture and with a lack of education or skills are also moreaffected by poverty.

The report said the State needs to strictly consider the adjustment of VAT asit can impact budget collection, economics and poverty reduction.

From the macro perspective, the report’s findings also show with the proposalto raise taxes by 1.2 times by the MoF, State budget revenue will increase by4.9 percent. If the Government uses the additional taxes for developmentinvestment, total investment in society will rise by 1.7 percent, but total householdincome and expenditure will decrease by more than 0.9 percent. As a result, thereal output of the national economy will not increase.

With the plan to increase the tax rate for goods taxed at 5 percent to 10percent, State budget revenue will increase by 2 percent. If the Governmentuses this amount for development investment, the total investment in societywill be up nearly 1.8 percent, but total household income and expenditure will beup by 1 percent.

With these analyses, the report stressed that increasing taxes will not make thenet output of the economy increase, but will make welfare of all households insociety decrease.-VNA