Impacts of Direct and Indirect Tax Reforms in Vietnam: A CGE Analysis

Keshab Bhattarai, Dung T.K. Nguyen and Chan V Nguyen

MPRA Paper from University Library of Munich, Germany

Abstract: The study applies a multi-sector multi-household static general equilibrium tax model to assess economy-wide impacts of taxes in Vietnam. It examines two tax reform scenarios based on the tax reform plan proposed by the Vietnam Ministry of Finance. The first scenario is increasing 20% from the current Value-Added Tax (VAT) rate. The second scenario relates to setting a competitive Corporate Income Tax (CIT) rate to the lowest rate in ASEAN countries. In general correction of current tax distortions will have positive impacts on labour supply, utility, consumption, output and welfare of households as they reallocate resources from more to less productive sectors of the economy. The CGE model allows to find the impacts on microeconomic and macroeconomic variables including employments, output, prices and capital stock as well as on welfare of households of an increase in the standard VAT rate from 10 to 12% and reduction in the CIT rate from 20 to 17% as considered by the current government. This study contributes to the literature on the CGE model for Vietnam economy, it is also a small step towards finding the optimal tax structure in Vietnam.

Keywords: Tax reform; general equilibrium; tax analysis; Vietnam (search for similar items in EconPapers)
JEL-codes: C68 D58 E62 H3 (search for similar items in EconPapers)
Date: 2018-10-31, Revised 2019-02-08
New Economics Papers: this item is included in nep-cmp, nep-mac, nep-pbe, nep-sea and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Impacts of Direct and Indirect Tax Reforms in Vietnam: A CGE Analysis (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:92068

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