Measuring the Impact of Value-Added Tax Cuts on Consumers in Vietnam

Abstract

This study aims to explore how temporary changes in VAT rates affect consumer perception and behavior in Vietnam. The research is conducted based on self-administered questionnaires collected from residents of Vietnam. The snowball sampling technique was utilized to gather the data set during 2023. A questionnaire was prepared and evenly distributed among three main subjects from three different sectors and with income levels in three groups: low; medium; and high, respectively: (1) Workers from the manufacturing and industrial sector; (2) Lecturers from the education and training sector; (3) Managers from the finance and banking sector. A total of 513 usable questionnaires were analyzed. This paper employs the multiple regression analysis model (OLS) to test the study hypothesis. Analysis results reveal that the reduction of VAT in Vietnam from 10% to 8% has significantly impacted consumer behavior, where consumer products within the daily and durable goods categories are anticipated to grow, however, expenditure on entertainment products or services tends to decrease. Additionally, reasons leading to changes in consumer behavior were also discussed in the study. The findings of this paper will offer insightful perspectives for policymakers in formulating future VAT policies, especially considering the items that significantly influence changes in consumer purchasing power following VAT changes.