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

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

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.

Suggested Citation

  • Bhattarai, Keshab & Nguyen, Dung T.K. & Nguyen, Chan V, 2018. "Impacts of Direct and Indirect Tax Reforms in Vietnam: A CGE Analysis," MPRA Paper 92068, University Library of Munich, Germany, revised 08 Feb 2019.
    • Handle: RePEc:pra:mprapa:92068
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    Cited by:

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    2. Krajňák, Michal & Krzikallová, Kateřina & Friedrich, Václav, 2022. "Does political orientation affect economic indicators in the Czech Republic?," Journal of Policy Modeling, Elsevier, vol. 44(6), pages 1219-1231.
    3. Umar Bambale, Ibrahim & Sanusi Rafindadi, Aliyu & Usman Bello, Adamu, 2022. "Household Welfare And Poverty Impact Of Domestic Revenue Mobilisation Strategies In Nigeria: A Computable General Equilibrium (Cge) Analysis," Ilorin Journal of Economic Policy, Department of Economics, University of Ilorin, vol. 9(2), pages 1-13, June.
    4. Ibrahim, Umar Bambale & Abubakar, Isah Funtua, 2020. "Welfare Implication of Tax Rates Increase in a Recessionary Economy," MPRA Paper 111132, University Library of Munich, Germany, revised 13 Dec 2021.

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    More about this item

    Keywords

    Tax reform; general equilibrium; tax analysis; Vietnam;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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