The Impact of Production Tax on Agriculture Sector in Vietnam: A Computable General Equilibrium Approach

A small fluctuation in the production tax may cause enormous changes in most of remaining economic value. Especially in Vietnam, a developing country, the effect of this problem in terms of agriculture sector should not be ignored. This paper would like to study this effect based on the computable general equilibrium model approach. With the latest Input – Output table of Vietnam in 2007, this paper conducts the Computable General Equilibrium (CGE) model for six simulations (increasing the agricultural production tax rate by 5%, 10%, 20% and decreasing by 5%, 10%, 20%). Consequently, we can find out that an increase of 5% of production tax amount in agriculture activity will lead to an increase of Government surplus of 111.117 billion Vietnam Dong (VND), as well as decrease the social welfare by 1918.705 billion VND. On the other hand, a decrease of 10% in this production tax will be resulted in the Vietnamese government’s deficit of 218.628 billion VND while the general social welfare increases by 3899.943 billion VND.