GLOBAL MINIMUM TAX - A CHALLENGE FOR VIETNAM
Publication date: 27/02/2023
Implementing the multilateral convention to implement measures related to the agreement to prevent base erosion and profit shifting, with nearly 140 countries and territories participating, multinational companies will be subject to a minimum tax rate of 15% regardless of which country they operate in.
The global minimum tax is designed to prevent a "race to the bottom" in tax rates between countries. In the context of globalization, countries, especially emerging and developing countries, face great pressure in competing to attract foreign investment through tax incentives as this is one of the most important factors for these countries to attract FDI from multinational companies. Will Vietnam lose its advantage in attracting investment due to attractive tax incentives, as setting a tax rate effective below 15% will affect business location decisions and tax collection ability?
According to experts, Vietnam is facing two challenges in this situation:
First, domesticating the global minimum tax to reduce its impact on companies that have invested in Vietnam to ensure feasibility, effectiveness, and avoid disputes when implementing, creating peace of mind for large investors intending to invest in Vietnam.
Second, Vietnam needs to change its investment attraction policy towards focusing on improving competitive capacity from factors such as business environment, labor force, infrastructure... which are basic factors when making investment decisions instead of aiming for tax incentives. Continue to promote strengths such as political stability, favorable location and invested and completed infrastructure, high-quality labor force, and moderate costs to create a good investment environment.
"Tax is not a factor to promote investment decisions, but an investment objective. Vietnam needs to continue to create a good investment environment, protected by law, high-quality labor force, and supported by good infrastructure, then Vietnam does not need tax incentives because these are competitive factors," said Frederick Burke, Managing Partner of Baker McKenzie Vietnam.
At Kizuna, we are proud to be a reliable partner, striving to bring a safe, efficient, and sustainable production environment, complete infrastructure, easy access to high-quality labor sources, diverse at reasonable costs that will help investors focus on production and business activities and maintain a competitive advantage.
News summary from Marketing Division - Kizuna JV Corporation.