Tax Incidence in Vietnam

Authors: Haughton, Jonathan¹; Quan, Nguyen The²; Bao, Nguyen Hoang³

Source: Asian Economic Journal, Volume 20, Number 2, June 2006 , pp. 217-239(23)

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Abstract:

This paper examines the incidence of taxation in Vietnam, using data from the Living Standards Survey of 1997-1998 and an input-output matrix for 1997. The tax system in 1998 was slightly progressive, taking the equivalent of 7.8percent of spending for households in the lowest, and 10.3percent from households in the highest expenditure quintile. The replacement of the turnover tax by a value-added tax in January 1999 made the system marginally more progressive, and the falling importance of taxes on trade has had a negligible effect on the overall incidence of the tax system. The tax system is progressive overall because business income taxes fall mainly on better-off households; and low-income households rely heavily on home consumption, which is untaxed. Against this, agricultural taxes and fees are highly regressive. The recent phasing out of the agricultural land use tax is making the tax system more progressive; however, efforts since 2004 to limit price increases for motor fuels have effectively provided a relatively greater subsidy to rich than to poor households.

Keywords: Vietnam; tax incidence; indirect taxation; compensating variation; input-output matrix; H22; O23; P35

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1467-8381.2006.00231.x

Affiliations: 1: Department of Economics, Suffolk University, 8 Ashburton Place, Boston, MA 02108, USA 2: General Statistics Office, Hanoi, Vietnam 3: Economics University of Ho Chi Minh City, Vietnam

Publication date: 2006-06-01