TAILIEUCHUNG - Tax Incidence in Vietnam
This paper examines the incidence of taxation in Vietnam, using data from the Living Standards Survey of 1997-98 and an input-output matrix for 1997. The tax system in 1998 was slightly progressive, taking the equivalent of of spending for households in the lowest, and from households in the highest, expenditure quintile. The replacement of the turnover tax by a VAT in January 1999 made the system marginally more progressive, while the falling importance of taxes on trade has had a negligible effect on the overall incidence of the tax system. | ASEJ876 Tax Incidence in Vietnam* Nguyen Hoang Bao, Nguyen The Quan, and Jonathan Haughton Revised, February 21, 2006 Suggested running head: TAX INCIDENCE IN VIETNAM * Nguyen Hoang Bao: Economics University of Ho Chi Minh City, Vietnam. Nguyen The Quan: General Statistics Office, Hanoi, Vietnam. Jonathan Haughton: Department of Economics, Suffolk University, USA. We would like to thank the Ford Foundation for financial support for this project, Nguyen Phong and the General Statistics Office of Vietnam for allowing us to use the data and for providing encouragement, participants at a GSO Workshop in Hanoi (August 2003) and seminars at Clark University and Suffolk University for helpful comments, and two anonymous referees for very useful suggestions. Tax Incidence in Vietnam February 2006 Page 1 of 33 Abstract This paper examines the incidence of taxation in Vietnam, using data from the Living Standards Survey of 1997-98 and an input-output matrix for 1997. The tax system in 1998 was slightly progressive, taking the equivalent of of spending for households in the lowest, and from households in the highest, expenditure quintile. The replacement of the turnover tax by a VAT in January 1999 made the system marginally more progressive, while 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 has effectively provided a relatively greater subsidy to rich than to poor households. Keywords: Vietnam, tax incidence, indirect taxation, compensating variation, input-output matrix. JEL .
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