Slashing VAT, delaying benefit fees: Proposals to save tourism sector

The tourism sector needs support to promote its recovery

Over the past decade, Vietnam has become a leading destination of global tourism, with the industry growing at an average annual rate of 22 percent and becoming a spearhead economic sector. Nguyen Trung Khanh, Director General of the Vietnam National Administration of Tourism, said that the tourism industry in general, the destinations and service providers in particular have affirmed their position in the world and the region by winning many prestigious awards.

However, along with many other fields, the tourism industry has plunged into an unprecedented crisis.

The latest MCST report showed that 95 percent of the travel enterprises have suspended operations, 10 percent of which have terminated operations. Tourist accommodations in Hanoi and Ho Chi Minh City are reporting a 10 percent occupancy, while provinces with epidemic zones such as Da Nang, Quang Nam, and Quang Ngai had almost no visitors. Resort tourism centers such as Khanh Hoa, Kien Giang, Binh Dinh, and Quang Ninh provinces had occupancy rates of three to five percent. Most employees have quit or been fired, barring some equipment maintenance staff.

Among the solutions that the MSCT has proposed to the Government is an adjustment of electricity prices applied to tourism accommodations and a value added tax (VAT) cut from 10 to 5 percent through 2021.

In terms of worker support, the MCST has suggested the government extend the suspension of contributions to retirement benefits and life insurance, postpone the payment of union fees for those affected by the Covid-19 pandemic without penalty and extend income support measures. The Government should also consider a policy of delaying repayment of bank loan interests since tourism enterprises are not generating revenues.

Along with the above proposals, the Vietnam National Administration of Tourism is also urgently researching and preparing a second phase of domestic tourism stimulus, with the goal of building products that are both safe and attractive in price, and trips with appropriate quality assurance until the end of 2020.