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The seminar. Photo: T.D

Vietnam cannot stay out of the game

Speaking at the seminar, Dr Tran Du Lich, Member of the National Financial and Monetary Policy Advisory Council and Vice Chairman of the VIAC, said that if Vietnam implements the global minimum corporate tax policy from 2024, about 1,015 FDI enterprises will be affected because Vietnam has used two tools of tax incentives and land prices to attract investment. However, 141 countries (accounting for 90% of global GDP) have participated in this game. Therefore, the problem for Vietnam is to develop policies to still attract strategic investors.

Mr Phan Duc Hieu, Member of the National Assembly's Economic Committee and VIAC arbitrator, assessed that the first impact of the global minimum tax could reduce the effectiveness of the preferential policies on foreign investment attraction. This policy will affect large FDI enterprises, with a global turnover of over EUR 750 million and small projects. Because of the principle of global and agglomeration, they may be small projects in Vietnam but belong to the company's global business network.

Vietnam has mainly used tools of tax incentives. That is the policy of 4 years exemption, 9 years reduction, incentives for 23 special areas, lower incentives for 7 areas, preferential treatment for industrial parks, economic zones, high-tech zones, etc. As a result, according to preliminary estimates, the actual tax on FDI in Vietnam currently is 12.3%, lower than the global minimum of 15%. There are even some large corporations that are only subject to a tax rate of 2.75%-5.95%.

However, Vietnam cannot stay out of the game. According to the Action Plan on Base Erosion and Profit Shifting(BEPS), if Vietnam does not collect a tax rate of less than 15%, the countries where multinational corporations and companies are located will have the right to collect the rest. Meanwhile, Vietnam creates all favourable conditions for investors, but the rest is paid to the countries where the multinational corporations and companies are located, Mr Phan Duc Hieu added.

Improve the investment environment

According to experts, in this game, we do not have the right to choose; we are forced to participate. But how to participate and how to respond to turn challenges into opportunities for Vietnam in general and Ho Chi Minh City in particular in attracting FDI.

According to Mr Do Thien Anh Tuan, Fulbright School of Public Policy and Management, there are challenges and many opportunities. Ho Chi Minh City is the bright spot to attract FDI in 2022, with a total investment of US$3.94 billion, rising 5.4% year-on-year; 11,273 projects are valid with a total investment of US$55.84 billion. FDI contributed more than 13% of the total investment capital of the whole society and contributed to the budget revenue of more than VND 78,000 billion, accounting for more than 17% of the total budget revenue of Ho Chi Minh City.

Ho Chi Minh City should change the mindset of approaching FDI attraction, remove the tax incentive approach in the FDI attraction strategy, and create a fair and equal competitive environment. In addition, it is to focus on investing in humans, improving the quality of infrastructure, the business investment environment and implementing green growth strategies.

Mr. Tran Viet Ha, deputy head of the Management Board of EPZs and I.Z.s in Ho Chi Minh City (Hepza), said that the tax incentives for investors are not a unique advantage. Ho Chi Minh City does not consider this a competitive advantage in attracting FDI. Currently, many new regulations affect investment projects, requiring the companion to remove difficulties for investors. For example, in the EPZs and I.Z.s in Ho Chi Minh City, there are separate plans, but when investors deploy planning larger than 6ha, they have to do 1/500 planning with complicated and unreasonable procedures such as consulting the residential community.

In addition, some businesses said that the transparency of tax policies, the risks of tax policies, and the reduction of administrative procedures, time and costs are of great concern to feel free to invest in Vietnam.

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Mai Phong Lan, the representative of the Ho Chi Minh City Department of Planning and Investment, said that in the first three months of 2023, Ho Chi Minh City attracted about US$500 million FDI. So far, the total registered FDI capital has reached nearly US$80 billion, making a great contribution to the city's budget revenue. In addition to attracting new investment, Ho Chi Minh City is very interested in existing investors. Therefore, Ho Chi Minh City is urgently implementing policies to support foreign investors, focusing on creating a land fund for building new industrial zones, serving green growth areas and mitigating global climate change.