At the conference (Photo: VNA)Dr Tran Du Lich told the seminar, titled "Global MinimumCorporate Tax - Prospects and Challenges in attracting FDI in HCMCity", that the global minimum corporate tax rate of 15%, which isset to be applied next year in Vietnam, is forecast to have a significantimpact on Vietnam in whose economy FDI plays a significant role.
The tax applies to multi-national corporations with revenues of atleast 750 million euros (870 million USD). When a company invests in a foreigncountry but pays corporate income tax of less than 15% in that country, it willhave to pay the difference in the country where it is headquartered.
As of today, 141 countries and territories have signed up toimplement the tax.
“It is estimated that 1,015 FDI companies in Vietnam will beaffected by the tax,” said Lich, who is a member of the National AdvisoryCouncil for Monetary Policies and vice president of the Vietnam InternationalArbitration Centre.
Vietnam uses tax and land rentals as two key incentives to attractFDI, and it needs to amend its investment attraction policies to ensurecompatibility with the minimum tax but still maintain a favourable environmentto attract investment, he said.
Phan Duc Hieu, Permanent Member of the National Assembly’sEconomic Committee, said in recent years Vietnam has mainly used tax incentivessuch as complete waivers and breaks and incentives for investors investing inindustrial parks, economic zones, high-tech parks, and others.
“According to preliminary estimates, foreign companies are subjectto an average corporate income tax of 12.3%, against the regular 20%. The ratesfor large corporations are as low as at 2.75 -5.95%.”
He and other experts at the seminar agreed that the new tax ruleis both a challenge and an opportunity for Vietnam with regard to improving itsinvestment environment.
The country needs to switch to cost-based incentives, includingsuper-reduction and cost-based tax deductions if needed, he added.
Do Thien Anh Tuan, a lecturer at the Fulbright School of PublicPolicy and Management, said HCM City was a bright spot in attracting FDI with atotal of 3.94 billion USD last year, a year-on-year increase of 5.4%.
It had 11,273 operational projects with total capital of 55.84billion USD at the end of last year, and FDI has greatly contributed to itssocio-economic development, he said.
To continue attracting high-quality FDI projects, the city shouldabandon its tax incentive approach and focus on creating a fair and equalcompetitive environment, investing in human capital, promoting R&D,upgrading infrastructure, improving the business environment, speeding upadministrative reform, implementing green growth, and making itself a livablecity, he said.
Agreeing with him, Phan Vu Hoang, Deputy General Director ofDeloitte Vietnam, said the quality of the investment environment is moreimportant than incentives.
Vietnam has no other choice than implement this tax rule, butit has to participate wisely, he said.
“If we are smart enough to redesign the system of preferentialpolicies to attract investment, we have countless opportunities.”
Le Thanh Nhan, manager of the Saigon Hi-Tech Park’s enterprisemanagement department, said improving the business and investment environmentare key to attracting investment.
Prompt resolution of investors’ difficulties by governmentagencies is also very important, he said.
“We have many good policies but their implementation is somehownot effective, and that needs to be improved.”/.
VNA
