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With a global minimum tax, how will Vietnam keep investors?
Vietnam will have to solve a difficult problem: How to raise the minimum tax rate to 15% but still keep the FDI inflows into Vietnam.
Having invested more than 18 billion USD in Vietnam, Mr. Kim Yong Seok, Director of External Relations of Samsung, said: “Although Vietnam is a developing country with a lot of potential, there are still some disadvantages, including a number of investment incentive policies. I want to emphasize that Vietnam is too focused on investment incentives through taxes.
And when the world applies the global minimum tax, these policies will no longer work. For businesses that have been and are investing here, we are quite surprised with the application of the global minimum tax.”
Therefore, Samsung hopes that the Vietnamese Government can research and issue new measures to support and assist foreign investors.
Vietnam will have to solve a difficult problem: How to raise the minimum tax rate to 15% but still keep the FDI inflows into Vietnam.
Ms. Huong Vu, General Director of EY Consulting Vietnam said: “Experts have come up with many measures such as increasing costs, depreciation, etc. However, under the impact of the global minimum tax policy, we believe that these options will not work. Therefore, we hope that Vietnam can research methods to support businesses with cash.”
Around the world, many countries have applied this measure and achieved certain results. The representative of EY Consulting Vietnam also said that EY is willing to share and accompany Vietnam so that when applying the cash support method, it will not violate regulations of the World Trade Organization (WTO).
Prof. Dr. Nguyen Mai, Chairman of the Association of Foreign Investment Enterprises, said: “When Intel entered Vietnam in 2004-2006, the Vietnamese Government established a working group, which included representatives of relevant ministries to plan negotiation scenarios with Intel. This group required financial support and Vietnam accepted, but not entirely in cash, but also by training high-tech human resources.
Change in investment attraction policy
Dr. Can Van Luc said that Vietnam needs to change its investment attraction policy towards focusing on improving competitiveness from factors such as the business environment, labor resources, infrastructure, etc. which are the basic factors when making business investment decisions; instead of tax incentives.
Mr. Dau Anh Tuan, Deputy General Secretary, Head of the Legal Department of VCCI, said: “International corporations are still very confused, as the global minimum tax law is still unclear. There is a huge risk to the investment environment, with the biggest losses are anticipated for the countries that receive large investment flows like Vietnam.”
“Anyway, it is necessary to meet the common standards of the world, and Vietnam will have to gradually join in in according to the appropriate roadmap. This is an opportunity for Vietnam to review, promulgate and adjust policies in accordance with tax and investment laws,” he said.
In general, the global minimum tax will benefit capital exporters rather than capital importers like Vietnam.
Besides, the decisive role of Vietnam is little. “Will Vietnam lose its advantage in attracting investment? Currently, tax incentives and CIT reductions are still important to investors. However, how can investors who have entered Vietnam can secure their rights? How can businesses continue to invest with confidence in Vietnam?”, this expert asked a series of questions.
Currently, many large foreign-invested projects are enjoying corporate tax rate of 10%, exemption for 4 years, 50% reduction for 9 years (all lower than 15%).
In general, Vietnam needs to make more efforts in the coming time to improve the cost and quality of human resources; Land rental price, business premises; Infrastructure quality (energy, industrial zones); Cost and quality of logistics; Policy on science and technology (R&D expenses); Policy quality…
Therefore, the overall package is not only about taxes to help Vietnam attract foreign investment, operate more efficiently.
According to Mr. Dau Anh Tuan, Vietnam needs to amend tax laws such as applying a global minimum tax rate of 15% (which can be extended for a project life cycle); Amend the Law on Corporate Income Tax and the Law on Investment to legalize this commitment; There is a program to review the system investment incentives and incentives for appropriate amendments; There are programs to support investors who are enjoying tax incentives below 15%… In particular, Vietnam needs to establish a working group on this minimum tax rate including representatives of the following agencies: Tax, Investment, Construction, Labor, Science & Technology…
Mr. Dau Anh Tuan said that Vietnam needs to become a reliable destination and accompany businesses. That is the approach and brand affirmation that Vietnam needs to do in the coming time.
Luong Bang
Source: https://vietnamnet.vn/en/with-a-global-minimum-tax-how-will-vietnam-keep-investors-2068503.html