Currently, preferential tax policies in countries have created opportunities for businesses, especially multinational corporations, to develop and expand their business.
However, in the context of an unsynchronized and incomplete tax system and enforcement, along with many advantages in capital and experience, these enterprises have taken advantage of management loopholes to evade taxes through acts that erode the tax base or transfer pricing, transferring profits from places with high tax rates to places with low tax rates.
These activities have seriously eroded the budget revenue of countries, leading to many countries in the world unilaterally applying different types of taxes, giving rise to disagreements and disputes between countries.
Specifically, most developing countries are “engaged in a race to the bottom” by competing to reduce corporate income tax or implementing many tax incentives. The beneficiaries are multinational corporations, which, despite their high profits, pay very low corporate income tax, or even no tax at all.
When a minimum tax is imposed, the race to the bottom is no longer there, FDI capital will no longer flow to developing countries, but will find new investment directions. Therefore, the global minimum tax is designed to prevent the “race to the bottom” in preferential tax rates between countries.
Ms. Nguyen Thi Cuc - President of Vietnam Tax Consultants Association.
In that situation, Vietnam's development of a global minimum tax policy to be applied from 2024 (including the regulation on the synthesis of minimum taxable income IIR) and a standard domestic supplementary minimum tax (QDMTT) aims to ensure the legitimate rights and interests of Vietnam, creating a level of trust between businesses and the Government so that businesses can continue to invest and expand investment in Vietnam.
In the process of researching and perfecting the global minimum tax regime in Vietnam, this policy is an inevitable move to help Vietnam gain the right to collect legitimate taxes. Vietnam has strengths in attracting investment such as geographical location, relatively stable economic, social and political environment and is still a dynamic economy with good growth rate.
Therefore, the Government's confirmation of participation in the global minimum tax mechanism partly affirms Vietnam's voice in integrating with global trends, enhancing Vietnam's position in terms of transparency in the policy system in the eyes of international friends and national forums.
However, from the experience of countries in the region, the application of global minimum tax will make Vietnam's current tax incentives less attractive to multinational enterprises (MNEs) subject to application.
Meanwhile, multinational companies play an important role in Vietnam’s economic development. The absence of large MNEs as well as satellite enterprises will greatly affect Vietnam’s investment environment and competitive position internationally.
This is an issue that can affect the attraction and expansion of high-quality investment from MNEs. If not applied effectively, it can lead to a shift of investment from Vietnam to other countries with more attractive incentive policies and a more favorable investment and business environment.
Applying a global minimum tax is considered an opportunity for Vietnam to upgrade its strategy and model for attracting FDI.
The shift of investment from large FDI enterprises will negatively affect Vietnam's national industrial development goals. Vietnam is a developing country, one of the economies attracting the largest FDI in the world, so when the flow is distorted by minimum taxes, it will certainly be affected.
When tax incentives are no longer effective, Vietnam needs to have support measures to maintain its competitiveness in attracting investment. However, financial support should be carefully considered because it may not be consistent with the application of the global minimum tax rules.
Many foreign enterprises invest in Vietnam not only because of corporate income tax incentives but more importantly because of factors such as labor force and geographical location.
Instead of unreasonable tax incentives, cutting costs such as transportation and granting mining rights will bring better added value to create a more favorable investment environment for businesses, which can be considered as a partial compensation for businesses in Vietnam's investment environment.
At the same time, it is necessary to focus on improving Vietnam's competitiveness index. Thereby minimizing and eventually eliminating all hidden costs that businesses are bearing. Along with strengthening administrative procedure reform, improving the quality of public services: ensuring openness, transparency, consistency, ease of understanding, and ease of implementation to help businesses reduce management costs and improve business efficiency.
The application of global minimum tax is considered an opportunity for Vietnam to upgrade its strategy and model of attracting FDI. At that time, the traditional economic model will shift to a circular economy, green and sustainable growth, investment attraction will shift from tax incentives to strengthening protective laws, promoting high-quality labor, supporting good infrastructure, and good customs policies .
Nguyen Thi Cuc - President of Vietnam Tax Consultants Association
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