The Ministry of Planning and Investment is soliciting comments on the Draft Report on the overall review and assessment of current investment incentive policies in Vietnam, along with a number of recommendations.
According to the Ministry of Planning and Investment, in the context of a rapidly changing and complex world, the international business environment and cross-border investment are facing many challenges. Global FDI flows decreased by 4%, and competition to attract foreign investment is becoming increasingly fierce. Many countries have taken strong actions to attract and retain FDI, creating pressure and motivation for Vietnam to reform its investment incentive policies.
Developed countries such as the US, EU, Japan, India, South Korea, and Taiwan are applying many preferential policies on land, electricity, water, investment capital, and taxes to attract FDI. These countries also focus on building "prosperous economic networks" or cooperating with countries to create global supply chains.
Developing countries such as India and Southeast Asian countries are also making efforts to facilitate investment and strengthen economic cooperation with the region to compete in attracting FDI, especially in the fields of technology and low-cost manufacturing.
The report highlights that global minimum taxes have a major impact on current tax policies. Change is rapid and must be implemented promptly to maintain competitiveness in attracting investment. Countries are planning and implementing policies to deal with global minimum taxes, creating a new “post-minimum tax” policy race.
In this context, Vietnam is recommended to consider reforming its investment incentive system, introducing diversified and flexible policies to meet international criteria. This will help ensure attracting strategic investors and satellite enterprises, while building an independent, self-reliant and sustainable economy.
According to the World Bank, countries should identify four types of investment based on investors' motivations, including: (i) Natural resource seeking; (ii) Market seeking; (iii) Strategic asset seeking; and (iv) Efficiency seeking. At the same time, they should consider the three most important factors influencing investment decisions, including: security and political stability, investment incentives, and policy predictability.
For Vietnam, a country with advantages in security and political stability, favorable geography for trade and supply, and an open economy with 15 Free Trade Agreements in effect, these characteristics allow Vietnam to implement policies to attract large-scale multinational corporations with production capacity and close links to the global value chain.
The report proposes a number of specific recommendations for reforming the investment incentive system.
Breakthrough investment incentive policies: Propose to establish breakthrough investment incentive policies, focusing on strategic investors and high-quality projects, especially in the fields of high technology, research and development, and environmental protection.
Diversify incentive policies: Research and diversify investment incentive policies, not only focusing on income tax but also combining with cost incentives, to attract new investors and promote added value.
Full cost accounting: When issuing tax incentives, it is necessary to fully calculate the related costs, and at the same time publicly disclose tax expenditure reports, creating mandatory documents in the budget building process.
Implement preferential land policies and infrastructure support: Strengthen the implementation of preferential land policies and support for basic infrastructure such as electricity, water, and transportation, helping foreign investors easily access business conditions.
Urgent solution on Global Minimum Tax: Propose immediate solution to address the impact of Global Minimum Tax, set out specific measures to support investment, especially in the high-tech sector.
Long-term investment incentive reform: Propose comprehensive and appropriate investment incentive reform for each target group, not completely eliminating income-based incentives, but applying them in parallel and alternating to effectively support diverse investor groups.
Improving the business environment: Continue to improve the business investment environment, reform administrative procedures and enhance the effectiveness of implementing incentive policies, to ensure they are properly and fully implemented in practice./.
Hoang Anh
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