Impact of tax structure system on GDP and progressivity: The case of Vietnam

To find out impacts of tax structure system in Vietnam on GDP and progressivity, models employed are Fixed-Effects and Two-Stage Least Squares, together with the regression model of tax progressivity. Data's source is from Vietnam General Statistics Office. It is cross-sectional time series over the period 1997-2010 for different 61 provinces in Vietnam. Findings present that Vietnam's tax policies are progressive, their integration policy impacts on the economic growth positively. In addition, the result is proved there is a significant relationship between the state budget and GDP. As a result, the budgetary expenses must be paid attention strictly. Because coefficients of value-added tax and corporate income tax are positive and significant, an increase in value-added tax or/and corporate income tax causes an increase in GDP. However, this view for a long-term is a negative impact on the economic growth, because the country can lose competitive advantages to attract foreign development investment, if keeping high tax rates. Note that several inadequacies in policies need reforms in both policies and tax structure system, in which corporate income tax must be focused, because of mobilization of financial outside the state is unstable. Currently, tax policies in Vietnam combine so many goals in each form of encouragement while the policy objectives are conflict, which makes difficulties to carry out. Existing lack of harmony among the taxes in the tax policy can cause a main reason of a decrease in the revenue target of the state and in regulating macro economy.