Oil sector investment crucial, but not at all costs

Attracting investment in Vietnam’s oil and gas industry is essential but not at all costs, and investment stimulation should transcend tax incentives, Vietnamese legislators said Wednesday.

The ideas were heard while National Assembly members discussed the country’s draft amended Petroleum Law. The proposed adjustments to the current law include an introduction of solutions to luring more investment to the industry.

The bill reduces the corporate income tax from 32% to 28% and has 0% fees for sea use. However, Vu Thi Luu Mai, deputy head of the legislative body's Finance and Budget Committee, said such a tax cut needs to be carefully thought out. She added luring investment should not commence at all costs.

Phan Duc Hieu, a delegate representing Thai Binh province, said incentives should be diversified, such as introducing tax deductions and tax credits.

A tax credit is an amount of money that taxpayers can subtract directly from the taxes they owe. Tax credits are seen to be more favorable than tax deductions since they reduce the tax due, not just the amount of taxable income.

Hieu added that the government needs to thoroughly study the “Global Minimum Tax” rule in the OECD’s Base Erosion and Profit Shifting (BEPS) actions to present related issues and relevant solutions to the legislature during its coming working session.

Vu Tien Loc, who represents Hanoi, said the new international rule needs to be taken into consideration for the oil and gas industry.

Dang Hoang An, Deputy Minister of Industry and Trade, said his office will continue working to add new investment incentives.

In terms of the role of the state-run oil and gas group Petrovietnam, delegates Tran Hoang Ngan - Ho Chi Minh City and Le Xuan Than - Khanh Hoa province said one separate chapter in the bill dedicated to the major is "too much". They suggested one or some articles instead.

However, Dao Hong Van - Hung Yen province argued that one separate chapter is necessary for the group, but suggested the bill should clearly define the regulating role of the government in order avoid conflicts of interest between regulators and investors or companies.

In clarifying, delegate Truong Trong Nghia - HCMC said Petrovietnam sometimes appears in the bill as a contracting party, and then as a government regulator at others, which means a possible conflicts of interest.