Johan Langerock, Oxfam Tax Policies expert, suggests Vietnam should eliminate tax incentives to build a fairer market (Photo: VNA)Hanoi (VNS/VNA) - Tax incentives had led to a decrease in State revenue in Vietnamover recent years, Nguyen Duc Thanh, Director of the VietnamInstitute for Economic and Policy Research (VEPR), said at aconference in Hanoi on November 13.
Theconference, themed "Towards a fair tax system", pointed out thatalthough Vietnam had posted impressive economic growth recently witha ten-year high GDP of 7.1 percent last year and possible highergrowth this year, Vietnam’s extraordinary economic track recordhad not been accompanied by a similar pathway in tax revenues.
Though tax incentivepolicies had contributed to the country’s economic growth, boostinginvestment, the conference thought it was time for Vietnam to rationalisesuch incentives for big companies as lowering corporate income tax rates andthe existence of many tax incentives for foreign investors had decreasedtax revenues.
“In the long term thiscould harm the sustainability of the country,” Oxfam’s tax policies expertJohan Langerock told Viet Nam News.
According to data givenat the conference, budget revenue decreased from 27.3 percent of GDPin 2010 to 23.7 percent in 2016. Revenue from corporate incometax decreased sharply, from 6.9 percent of GDP in 2010 to 4.3 percent in2017.
Regarding the fact thattax incentives had attracted foreign investment to Vietnam, VEPR DirectorThanh told Vietnam News: “FDI policies should be reconsidered.”
“Enterprises that onlyarrive in Vietnam to enjoy tax incentives were not the outstandingones. Outstanding enterprises want transparent tax policies for theirinvestments, not just the incentives,” he said.
Thanh calculated thatfrom 2012-2016, Vietnam's total corporate income tax incentives forbusinesses accounted for 7 percent of the total state budget revenue, 1.4 timeshigher than highest budget spending on health in 2012
Agreeing with Thanh,Langerock told Viet Nam News: “The Vietnamese Government givespresents for foreign investors, who will not stay in Vietnam. So it is betterto give such presents to local companies, especially the local SMEs.”
Langerock added thatcertain incentives for local SMEs could help strengthen the economy in thelong term as he believed local SMEs had big potentialfor development and would play an import role in the region in the future.
While Vietnameseauthorities have not been paying enough attention to analyzing the efficiencyand effectiveness of its tax expenditure policies, a study from theOrganisation for Economic Cooperation and Development OECD found thesocial cost of tax expenditures (meaning those given as tax incentives) inVietnam was “too large to be further ignored”. According to the OECD, therevenue loss was estimated at 1 percent of the GDP, meaning a staggering amountof over 50 trillion VND (2.15 billion USD).
According to a recentsurvey by Grant Thornton on private equity prospects in Vietnam, 69 percentconsidered rising disposal income and middle-income status the mostimportant factors for investing in Vietnam; 60 percent considered high andstable economic growth and only 13 percent considered Government incentives andsubsidies as the most important factor.
The Oxfam expertsaid Vietnam could get rid of large tax incentives without harming itsgrowth or competitiveness.
Langerock said someASEAN countries were pushing each other into an aggressive race to thelowest corporate taxes. As an example, he said Singapore had createda lot of tax incentives for international enterprises, making itself a “taxhaven” that troubled neighbouring countries with unfair competition.
He said as the nextASEAN chairman in 2020, Vietnam should act to stop tax competition, suggestingVietnam should raise awareness and debate the issue of tax competition and taxincentives at a regional level./.
Theconference, themed "Towards a fair tax system", pointed out thatalthough Vietnam had posted impressive economic growth recently witha ten-year high GDP of 7.1 percent last year and possible highergrowth this year, Vietnam’s extraordinary economic track recordhad not been accompanied by a similar pathway in tax revenues.
Though tax incentivepolicies had contributed to the country’s economic growth, boostinginvestment, the conference thought it was time for Vietnam to rationalisesuch incentives for big companies as lowering corporate income tax rates andthe existence of many tax incentives for foreign investors had decreasedtax revenues.
“In the long term thiscould harm the sustainability of the country,” Oxfam’s tax policies expertJohan Langerock told Viet Nam News.
According to data givenat the conference, budget revenue decreased from 27.3 percent of GDPin 2010 to 23.7 percent in 2016. Revenue from corporate incometax decreased sharply, from 6.9 percent of GDP in 2010 to 4.3 percent in2017.
Regarding the fact thattax incentives had attracted foreign investment to Vietnam, VEPR DirectorThanh told Vietnam News: “FDI policies should be reconsidered.”
“Enterprises that onlyarrive in Vietnam to enjoy tax incentives were not the outstandingones. Outstanding enterprises want transparent tax policies for theirinvestments, not just the incentives,” he said.
Thanh calculated thatfrom 2012-2016, Vietnam's total corporate income tax incentives forbusinesses accounted for 7 percent of the total state budget revenue, 1.4 timeshigher than highest budget spending on health in 2012
Agreeing with Thanh,Langerock told Viet Nam News: “The Vietnamese Government givespresents for foreign investors, who will not stay in Vietnam. So it is betterto give such presents to local companies, especially the local SMEs.”
Langerock added thatcertain incentives for local SMEs could help strengthen the economy in thelong term as he believed local SMEs had big potentialfor development and would play an import role in the region in the future.
While Vietnameseauthorities have not been paying enough attention to analyzing the efficiencyand effectiveness of its tax expenditure policies, a study from theOrganisation for Economic Cooperation and Development OECD found thesocial cost of tax expenditures (meaning those given as tax incentives) inVietnam was “too large to be further ignored”. According to the OECD, therevenue loss was estimated at 1 percent of the GDP, meaning a staggering amountof over 50 trillion VND (2.15 billion USD).
According to a recentsurvey by Grant Thornton on private equity prospects in Vietnam, 69 percentconsidered rising disposal income and middle-income status the mostimportant factors for investing in Vietnam; 60 percent considered high andstable economic growth and only 13 percent considered Government incentives andsubsidies as the most important factor.
The Oxfam expertsaid Vietnam could get rid of large tax incentives without harming itsgrowth or competitiveness.
Langerock said someASEAN countries were pushing each other into an aggressive race to thelowest corporate taxes. As an example, he said Singapore had createda lot of tax incentives for international enterprises, making itself a “taxhaven” that troubled neighbouring countries with unfair competition.
He said as the nextASEAN chairman in 2020, Vietnam should act to stop tax competition, suggestingVietnam should raise awareness and debate the issue of tax competition and taxincentives at a regional level./.
VNA
