Policymakers, economic experts, business leaders, and tax consultants in Vietnam are taking part in a conference held by The Investor to help Vietnam maintain its status as an FDI destination while the global minimum tax (GMT) rules are enforced worldwide.
Almost 50 delegates representing ministries and government agencies, economic experts, representatives of business associations, law and auditing firms join the Friday event (click to access the conference).
Dr. Nguyen Anh Tuan, Editor-in-Chief of The Investor, head of the conference organizing board, said the event followed the first workshop held last June also on GMT and Vietnam.
The conference this year updates the progress of implementing GMT globally, share experiences of investment receiving countries, and propose solutions, mechanisms and policies to ensure the right to collect taxes in accordance with OECD regulations and maintain the competitiveness of Vietnam as an FDI destination.
Governments of the FDI investing and receiving countries have been taking drastic actions in considering and making policies related to GMT (OECD Pillar II). On December 15, the EU officially approved the plan to apply the minimum tax rate of 15% from 2024.
South Korea’s National Assembly decided that this country will apply GMT in 2024. The Japanese government has also announced the Draft Tax Reform, moving towards the adoption of a global minimum tax from the fiscal year 2024.
South Korea and Japan are major sources of FDI inflows to Vietnam. Therefore, Vietnam’s GMT application will have a direct impact on many big foreign-invested enterprises. The GMT, a once-in-a-lifetime global tax reform, will apply to multinational companies with revenue above 750 million euros.
Dr. Phan Duc Hieu, a standing member of the Economic Committee of Vietnam’s National Assembly, said that the Pillar II impact is just ahead, not far, therefore Vietnam needs to act quickly thereby offering appropriate solutions.
Sharing his opinion, international experts said Vietnam needs to speed up the process of working out policies and solutions relevant to GMT so as not to lose the right to collect taxes.
These efforts must harmonize the interests of both sides, the Vietnamese government and investors, encouraging them to maintain and expand investment in Vietnam, while the country would be able to lure more FDI capital in the new period.
Dr. Can Van Luc, chief economist at state-controlled BIDV bank, raised four recommendations to the government.
Firstly, he said the Ministry of Finance and the government’s GMT working group need to quickly study all impacts of the GMT application to proactively propose appropriate plans and solutions.
Secondly, both of them should propose the government submit drafts to the National Assembly for early promulgation and adjustments of tax and accounting policies in line with international standards, and in line with Vietnam’s tax laws.
Specifically, tax authorities need to review tax-related regulations, especially ones on tax management, to submit amendments to tax declaration regulations and procedures in line with OECD standards for early promulgation. They should come out in 2023 when GMT comes into effect across the world.
Luc said if it is not possible to complete the tasks before 2024, it is necessary to carefully study the OECD rules and guidelines, and consider developing and promulgating a qualified Vietnamese minimum tax policy as a quick response mechanism to protect the right to collect taxes, not letting the rights slide to other countries. Such can be viewed as a tax mechanism parallel to GMT, as Malaysia is acting.
Third, he said the finance ministry needs to assess the impact of GMT rules because influences by preferential policies are different for each country, multinational corporation, and investor. Therefore, studying a specific country is essential to develop an appropriate roadmap, Luc stressed.
Fourth, Vietnam needs to review and change its policies to attract FDI toward focusing on improving competitiveness from such factors as improving the business environment, supporting the training of skilled workers, and infrastructure, and developing support industries.
Hong Sun, chairman of the Korean Chamber of Commerce (Kocham) in Vietnam, said that many countries have been implementing an open business consultation process on issues related to Pillar 2. The Vietnamese government's special working group should also learn these experiences, and soon issue consulting documents so that subjects governed by GMT could have their opinions in this lawmaking process.
"This is very important as it will help Vietnam work out policies closely related to reality, reflect the business community’s desires, and harmonize the interests of the government and investors," he said.
Sun suggested the working group should quickly publicize official information channels through which the subjects governed can raise their opinions. Doing the above-mentioned things will help support and accelerate the GMT application in Vietnam.
Prof. Dr. Vu Minh Khuong, lecturer at the Lee Kuan Yew School of Public Policy, University of Singapore, stressed that the Pillar II rule on GMT that will come into force at the end of 2023 is an invaluable opportunity for Vietnam.
According to the Singapore-based professor, many wholly FIEs in Vietnam are very large firms and they enjoy tax incentives much lower than the GMT minimum of 15%. Therefore, Vietnam is likely to receive additional huge resources, possibly up to billions of US dollars per year, to invest in development and improve its competitiveness.
The professor added that, in order to retain and attract strategic investors, Vietnam needs to develop preferential and supportive policies in the coming decades. The government may consider identifying strategic investors as major investors, with R&D tasks and high technology, to offer effective incentives. This would help Vietnam boost its domestic production capacity, thus helping to improve national productivity and creativity.
Khuong also said it is advisable for Vietnam to smartly weigh the possibility of providing monetary support for strategic investors and FDI enterprises governed by GMT.
PwC Vietnam general director Dinh Thi Quynh Van stressed that it is necessary to have a new system of investment incentives to prevent tax benefits granted by Vietnam from being transferred to other countries and to ensure Vietnam’s competitiveness in attracting FDI.
She said Vietnam should introduce a new FDI policy with subsidies or tax deductions able to trade off in the new period, which is GMT application worldwide.
“Such tax reform initiatives will help Vietnam maintain its taxing rights while attracting more investment from multinationals by reducing capital costs and promoting businesses to participate in high-tech sectors necessary for national economic growth, thereby accumulating technology, experience, and know-how in Vietnam," she said.