Vietnam takes step towards global minimum tax to boost investment

HANOI, March 22 (Bernama-Xinhua): A global deal to ensure multinational companies pay a minimum tax rate of 15 per cent will force Vietnam to change the way it attracts foreign investors, local newspaper Vietnam News has reported.

Vietnam has been pursuing a range of fiscal policies for years aimed at luring foreign investments into the economy by offering tax relief and incentives, reported Xinhua.

While more than 130 countries, representing about 90 per cent of global gross domestic product (GDP), backed an agreement in 2021 to prevent global companies from stashing profits with a global minimum tax of at least 15 per cent that would apply to companies with annual revenues above 750 million euros.

The minimum tax rule, effective from 2024, aimed to make it harder for multinational companies to avoid taxation.

When it comes into force, tax incentives would no longer give Vietnam a competitive advantage in attracting foreign investment, said Do Van Su, deputy director of the Foreign Investment Agency under the Ministry of Planning and Investment, urging the government to promptly adapt to the change by developing new investment incentives.

Tax incentives, however, are not the only instruments that governments use to stimulate economic growth as foreign investors consider many other factors, including business environment and market growth potential, said Takeo Nakajima, chief representative of the Japan External Trade Organisation.

About 70 per cent of respondents surveyed by the European Chamber of Commerce said Vietnam could increase foreign investment inflows by reducing roadblocks in administrative procedures, 53 per cent suggesting infrastructure improvements, 35 per cent calling for skilled personnel and 47 per cent looking towards lower visa barriers for foreign experts.

Prime Minister Pham Minh Chinh said at a business forum last weekend that the government is developing new policies, scheduled for completion this year, in line with the global minimum tax and on the principle of creating a favorable business and investment environment in Vietnam.

Foreign direct investment disbursements in the Southeast Asian country rose 13.5 per cent to US$22.4 billion in 2022 from a year earlier, while investment pledges were down 11 per cent to US$27.72 billion, said the Ministry of Planning and Investment in a statement.

Vietnam is targetting a GDP growth of 6.5 per cent for this year after growing at the fastest pace since 2011 to 8.02 per cent in 2022. - Bernama-Xinhua