On July 24, 2023, the Government Office announced the conclusion of the Government Standing Committee on the Draft Laws and Proposals for Law making. According to this announcement, for the time being, online game business (online games) will not be subject to special consumption tax.
The Government Standing Committee assigned ministries and specialized management agencies to strengthen close coordination and effectively use legal tools, such as licensing and using personal user identification codes to control the limitations of online games.
Previously, the Ministry of Finance proposed to put online games under special consumption tax to limit the production and consumption of goods that are harmful to health and society.
Recently, Deputy Minister of Information and Communications Phan Tam signed an official dispatch to the Ministry of Finance expressing his opinion on the Proposal to develop the draft Law on Special Consumption Tax (amended). Accordingly, the Ministry of Information and Communications proposed that at present, the type of "online game service business" should not be added to the list of subjects subject to special consumption tax.
The reason is that according to incomplete statistics, the revenue from illegal games provided by foreign enterprises across borders to Vietnam in 2021-2022 accounts for nearly 30% of the total revenue of the entire game industry, but is not subject to any taxes. Meanwhile, special consumption tax is only applied to and collected from domestic enterprises, and cannot be applied to foreign enterprises. Therefore, if special consumption tax is applied to online games, it will significantly reduce the competitiveness of domestic enterprises compared to enterprises distributing cross-border games to Vietnam; increasing the inequality between domestic enterprises and foreign enterprises.
The official dispatch of the Ministry of Information and Communications affirmed that if special consumption tax is imposed on online games, it will cause domestic enterprises to move to establish businesses abroad such as Singapore, then provide cross-border online game services to Vietnam to avoid high taxes. Thus, the budget will lose a large amount of tax from this smokeless industry. Therefore, the goal of building a policy to increase revenue for the state budget is not feasible.
On the other hand, applying special consumption tax will not encourage domestic game businesses to increase investment and development, while this is one of the few industries in our country with great potential to develop and reach the world.
Researching the experiences of some countries with the top game industry development in the world such as China, Japan, Korea or some European countries shows that the governments of these countries all have policies to prioritize, encourage and support the development of local game businesses, including preferential tax policies. These countries do not apply special consumption tax policies to the game industry.
Mr. Nguyen Trong Nghia, representative of the Vietnam Game Producers and Publishers Alliance:
Over the years, domestic game development businesses have faced extremely fierce competition from global game and technology corporations, and have gradually lost their competitiveness in their own home market. In fact, according to statistics from the Department of Radio, Television and Electronic Information (Ministry of Information and Communications), there are less than 20 Vietnamese game businesses still operating regularly out of a total of more than 200 registered businesses. In addition to many Vietnamese businesses leaving the market, many businesses are also gradually selling themselves to foreign companies.
Ms. Nguyen Thi Dung, representative of Soha Game:
The Special Consumption Tax Law is to protect children and online game users for health reasons. This goal is correct, but the solution does not solve the problem that this law aims at. If the tax is imposed on domestic and young businesses, it will be difficult for these businesses to survive. Besides, domestic businesses are competing with foreign game businesses. Thus, if the special consumption tax is imposed, the game market will be in the hands of foreign players and pirated games.
Mr. Tran Phuong Huy, Director of VTC Intecom:
If special consumption tax is imposed, businesses like VTC will “die” at home. The government can manage online games through electronic identification codes like some countries are doing without having to use tax policies targeting online game businesses.
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