Attracting new generation FDI, the low tax rate is not enough
Attracting new generation FDI, the low tax rate is not enough
Accumulated to June 20, 2018, the whole country has 25,953 projects with Foreign Direct Investment (FDI) in force, a total registered capital is 331,24 billion USD. According to Mr. Bui Ngoc Tuan, deputy general director of tax consultancy at Deloitte Vietnam: “Vietnam has succeeded in attracting FDI, but to attract new generations of FDI with high spread and high added value low tax rates are not sufficient”
With a 20% corporate income tax rate, do you think Vietnam still attractive in attracting FDI?
Currently, Vietnam has the most attractive Corporate Income Tax rate in the word (the average Corporate Income Tax rate in the word is 27%). In the region, except Singapore and Hong Kong which have lower tax rate than Vietnam (17% and 16.5%) all other economies have a higher Corporate Income Tax rate.
Mr. Bui Ngoc Tuan, deputy general director of tax consultancy at Deloitte Vietnam
If the tax exemption and/or reduction policies are applied according to the branches, domains, geographical areas, capital sizes, labor scale, industrial parks, economic zones, economic zones, Corporate income tax in Vietnam is very attractive.
It can be said that the continuous reduction of corporate income tax at the same time applying diversified types of tax exemption and reduction has contributed greatly to FDI attraction in the last 10 years. But to attract new generations of FDI with high spread and high added value, only a reduction in taxes is not enough.
If deducting tax exemption and reduction policies according to business lines, fields, areas, scale ..., the normal CIT rate of Vietnam is only 12-14%. However, the business said that the total tax they have to pay up to 38-40% of income, sir?
The difference is that enterprise does not understand properly; understand all expenses are considered reasonable and valid when determining taxable income. For reasonable expenses, if want to be deducted when determining taxable income, enterprises must have all papers, invoices and vouchers. If the enterprise cannot meet this requirement, this expense shall not be considered reasonable and valid, thus raising the taxable income and the tax amount to be increased. This issue is not only FDI enterprises, but domestic enterprises; even large-scale enterprises of corporations are also entangled.
Previously, what incentives the enterprises entitled to? How much? How long? That is specified in the investment license, the license to establish an enterprise. With a view to reforming administrative procedures, enterprises are now able to determine the types of incentives they enjoy, calculate their own taxes, self-assess their taxes and pay taxes by electronic means. In many cases, when inspecting and examining, the tax office determines that an enterprise is not eligible for preferential treatment or the level of incentives is lower than the level determined by the enterprise, the enterprise must pay more taxes.
I affirm that Vietnam's Corporate Income Tax is one of the most attractive tax rate in the world, while the amount of taxes paid into the state budget as calculated by enterprises equates to 38-40% of profits, which means that all taxes, Other fees, including non-agricultural land use tax and insurance premium, social insurance, unemployment insurance for employees.
You said that to attract new generation FDI, the low Corporate Income Tax rate is not attractive enough. What other conditions are needed?
In supermarkets, before a lot of goods, consumers will be attracted immediately by the goods are low price, diverse colors, rich types. But they will not be able to pay immediately, but choose among that higher quality, produced by experienced enterprises, the brand has been confirmed in the market.
Similarly, which country offers attractive tariffs? Investment fields are diversified and limited. The diversified investment policy will attract foreign investors. But foreign investors only invest in countries that have clear economic institutions and have been attracting investment for many years; this is a place where many investors evaluate the stable and transparent business environment.
Similarly, which country offers attractive tariffs? Investment fields are diversified and limited. The diversified investment policy will attract foreign investors. But foreign investors only invest in countries that have clear economic institutions and have been attracting investment for many years; this is a place where many investors value the stable and transparent business environment.
In addition to strategic investors who want to do business in the long term, there are many investors who only invest when they enjoy preferential treatment, and then they transfer capital to other countries with higher incentives. In your opinion, how to retain these investors?
These "fly-in" investors are called marginal investors. But among the marginal investors, there are many investors after the investment, they don’t want to fly again, but stay on long-term investment.
The ultimate goal of investing, trading is to maximize profits. Preferential policies only appeal to the original investor. Wanting to keep the investors in general, the marginal investors in particular, as I said, the most important is to continuously accelerate the reform of administrative procedures; improving the investment and business environment; To build a healthy competitive environment and equal.
In addition, it is necessary to support enterprises studying the investment environment, the project construction and the whole operation process; expand the market by joining bilateral and multilateral trade and investment agreements; to maintain macroeconomic stability; to concentrate investment on, perfect the transport, to implement policies to reduce costs for businesses...
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