Attract FDI: Need tax incentives to encourage long-term investment

VCN - After 30 years, it is undeniable there have been contributions by foreign-invested enterprises (FDI) to Vietnam's socio-economic development. This shows the effectiveness of the policy of attracting FDI. However, it is time to re-evaluate these policies in a holistic manner to accommodate the new development period of the country. Customs newspaper had an interview with Associate Prof. Dr. Le Xuan Truong (photo) - Head of Tax and Customs Department, Academy of Finance around this issue.  
attract fdi need tax incentives to encourage long term investment

How do you assess the financial incentive policies to attract FDI in the past time? How effective are those incentives?

First of all, I think that before 2004, the financial preferential policy had a distinction between domestic enterprises and FDI enterprises. However, since 2004, implementing the policy of the Party and the State is to attach importance to both FDI and domestic capital, so the financial preferential policies have gradually shifted towards applying equally between economic section and types of businesses.

For accurate and comprehensive evaluation, a full survey of information is required. However, from the movements of investors, market reactions and changes in the economy in the past years, it can be seen that the financial preferential policies have created an equal legal environment in production and business to compete and develop between domestic enterprises and FDI enterprises, thereby contributing to attracting both domestic and foreign investment capital, promoting exports and creating a foundation for economic growth, creating many jobs and improving people's lives.

Financial preferential policies, especially corporate income tax incentives, have contributed to economic restructuring in the direction of modernization and promotion of the country's comparative advantages. Besides large state-owned economic groups, there are more and more private enterprises and FDI enterprises in the country. Many famous corporations in the world have invested heavily in Vietnam such as Samsung, Toyota, Honda, and Mitsubishi...

FDI enterprises with FDI capital contributed significantly to import-export turnover. Export of FDI sector accounts for an increasing proportion of the total export turnover of the whole country (accounting for 72.6% in 2017). Along with that is a significant contribution to the state budget revenue. In 2012, the FDI sector contributed to the state budget (excluding revenue from crude oil) of over VND 83 trillion, in 2013 more than VND 111 trillion, more than VND 123 trillion in 2014, more than VND 140 trillion in 2015. In 2016, it was VND 161 trillion, accounting for 19% of the total state budget revenue and by 2017 accounted for 14.5% of the total state budget revenue.

It can be seen that preferential policies have brought Vietnam quite a lot of "profits". However, inadequacies must still exist. According to you, what are they?

Exactly, financial preferential policies in general and tax incentives in particular still have some shortcomings that need to be adjusted to better serve the country's socio-economic development. These are: High preferential rates, large preferential areas (especially corporate income tax incentives) and spread to reduce state budget revenue while the state budget is very insufficient to meet demand for investment in socio-economic development.

In addition, although the tax preferential policy applies uniformly to all economic sectors, in reality, the FDI sector is enjoying more from the financial preferential policies shown in the proportion on the corporate income tax entitled to exemption and reduction of FDI enterprises on the total exempted corporate income tax of the whole country up to 76%, and the rate of preferential corporate income tax exemption and reduction of FDI enterprises on total of payable corporate income tax based on the common tax rate of 48%, while this rate of state-owned enterprises is 4.6% and non-state is 14%.

The integration of social policies into corporate income tax incentives makes tax policies more complicated, difficult to manage, easy to create loopholes for businesses to take advantage of tax avoidance, transfer pricing and tax evasion.

In particular, tax incentives by investment areas are less effective in practice but create favorable conditions for activities of price transfer, tax avoidance and tax evasion.

From the perspective of an expert, according to you, in the coming time, how should the Ministry of Finance adjust these policies to attract better capital and overcome existing shortcomings?

Stemming from the shortcomings in the above financial incentives, it is necessary to adjust this policy in the following basic directions:

Firstly, it is necessary to narrow the tax incentives, especially corporate income tax incentives. Accordingly, should only focus on tax incentives for a few important sectors and sectors according to the development policy of the State, the industry of producing high value-added products, the field of socialization, technology, and environment and related to agriculture, farmers and rural areas. Tax incentives should be removed to implement social policy (shifting to social policy implementation with other financial instruments); eliminate "redundant" incentives, such as tax incentives for industrial parks.

Secondly, it is recommended to select tax incentives to encourage long-term investments. Accordingly, it is recommended to reduce the subjects who are entitled to tax exemption, corporate income tax reduction for a definite time and reduce tax exemption and reduction time.

Thirdly, unifying all tax incentives turn into law, not providing tax incentives in other specialized laws to ensure consistency and transparency of the law.

Fourthly, completing preferential land policies towards reviewing land preferences ensures consistency between land law, investment law and other policies of the State. At the same time, it is necessary to clearly identify the beneficiaries of land incentives for the State to come directly to the beneficiaries.

Thank you Sir!

https://baohaiquan.vn/thu-hut-fdi-can-uu-dai-thue-khuyen-khich-cac-doanh-nghiep-dau-tu-dai-han-101470.html

By Hong Van/Bui Diep

Related News

FDI enterprises maintain their own advantages to retain high-quality human resources

FDI enterprises maintain their own advantages to retain high-quality human resources

VCN - In the first months of 2024, foreign direct investment (FDI) attraction activities continued to be vibrant, showing that foreign investors maintained their confidence and optimism in the Vietnamese market. However, finding and retaining high-quality human resources requires FDI enterprises to have many policies to maintain their advantages.
FDI enterprises records US$321 billion in trade

FDI enterprises records US$321 billion in trade

VCN - Enterprises with foreign direct investment (FDI) account for 67.8% of the country's total import and export turnover.
Vietnam, Singapore promote cooperation in finance

Vietnam, Singapore promote cooperation in finance

VCN – Vietnamese Ministry of Finance's working delegation led by Minister Ho Duc Phoc had a meeting with Singaporean Second Minister of Finance Chee Hong Tat Mr. Chee Hong Tat. This is one of the activities in the Ministry of Finance's business trip program to Singapore lasting from August 5-6, 2024.
Exports in the second half of the year promised to be vibrant

Exports in the second half of the year promised to be vibrant

VCN - With export earnings of more than US$189.5 in the first 6 months of 2024, up 14.2% over the same period in 2023, the Ministry of Industry and Trade forecasts that exports will continue to grow positively in the second half of 2024.

Latest News

Frozen durian - new growth potential for durian industry

Frozen durian - new growth potential for durian industry

VCN - The official export of frozen durian to China will help optimize raw material sources for businesses, stabilize prices and increase the export value of this fruit from Vietnam.
Vietnam’s frozen durian exports to China could reach 300 mln USD in 2024: Official

Vietnam’s frozen durian exports to China could reach 300 mln USD in 2024: Official

Vietnam could earn 300 million USD from shipping frozen durian to China on the back of the signed protocol on plant quarantine requirements for the product between the two sides, Director of the Plant Protection Department (PPD) under the Ministry of Agriculture and Rural Development Huynh Tan Dat said on September 19.
US Commerce Department announces preliminary anti-dumping review results for Vietnamese catfish exports

US Commerce Department announces preliminary anti-dumping review results for Vietnamese catfish exports

The US Department of Commerce (DOC) has released the preliminary results of its 20th administrative review (POR 20) of the antidumping duty order on certain frozen fish fillets exported from Vietnam to the US for the period between August 1, 2022, and July 31, 2023.
Textile and garment industry perseveres in overcoming difficulties and seizing opportunities from the market

Textile and garment industry perseveres in overcoming difficulties and seizing opportunities from the market

VCN - In recent months, Vietnam's textile and garment exports have witnessed a strong recovery. However, along with opportunities, this top export industry in the country is facing many challenges from new, strict market requirements.

More News

Trade in goods in the second half of August increases over US$ 5 billion

Trade in goods in the second half of August increases over US$ 5 billion

VCN – The total trade in goods in the second half of August increased by 15.5% to US$ 38.02 billion compared to the first half of the month.
Bac Lieu plans to become renewable energy export hub

Bac Lieu plans to become renewable energy export hub

Deputy Prime Minister Tran Hong Ha has signed off a development plan for the Mekong Delta province of Bac Lieu that will cost 16-18 billion USD from now until 2030.
Vietnamese premium rice enters Canadian market

Vietnamese premium rice enters Canadian market

KD Trading, a logistic company run by two Vietnamese-Canadians, has become the sole partner to distribute ST25 rice (Mr. Cua's rice) in the Canadian market.
Logistics industry faces green transition imperatives

Logistics industry faces green transition imperatives

VCN - The logistics industry is among those most profoundly impacted by the burgeoning trend of green transition. However, whether this transition manifests as a pressure or a catalyst for growth depends on how businesses approach and implement it.
How are imported seafood products transferred to domestic consumption quarantined?

How are imported seafood products transferred to domestic consumption quarantined?

VCN - Enterprises importing aquatic raw materials for export production or processing for export transferred to domestic consumption encounter difficulties in implementing quarantine.
Steel stocks chill as weak demand sends a shiver through the industry

Steel stocks chill as weak demand sends a shiver through the industry

A significant recovery may be expected in 2025, leading to swift movements of funds within this sector.
Vietnam

Vietnam's seafood exports continue recovery

Vietnam saw a gradual recovery of seafood exports during the first eight months of this year, both in terms of demand and price.
Vietnam-China trade turnover hits nearly 130.8 billion USD

Vietnam-China trade turnover hits nearly 130.8 billion USD

The import-export turnover between Vietnam and China reached nearly 130.8 billion USD in the first eight months of this year, according to the latest statistics from the General Department of Customs.
Many good signals for businesses to accelerate seafood exports

Many good signals for businesses to accelerate seafood exports

VCN - Seafood exports in the first 8 months brought in nearly US$6.3 billion. With many advantages from the market and the dynamism of businesses, seafood exports are expected to increase compared to last year.
Read More

Your care

Latest Most read
Frozen durian - new growth potential for durian industry

Frozen durian - new growth potential for durian industry

VCN - The official export of frozen durian to China will help optimize raw material sources for businesses, stabilize prices and increase the export value of this fruit from Vietnam.
Vietnam’s frozen durian exports to China could reach 300 mln USD in 2024: Official

Vietnam’s frozen durian exports to China could reach 300 mln USD in 2024: Official

Vietnam could earn 300 million USD from shipping frozen durian to China on the back of the signed protocol on plant quarantine requirements for the product between the two sides, Director of the Plant Protection Department (PPD) under the Ministry of Agriculture and Rural Development Huynh Tan Dat said on September 19.
US Commerce Department announces preliminary anti-dumping review results for Vietnamese catfish exports

US Commerce Department announces preliminary anti-dumping review results for Vietnamese catfish exports

The US Department of Commerce (DOC) has released the preliminary results of its 20th administrative review (POR 20) of the antidumping duty order on certain frozen fish fillets exported from Vietnam to the US for the period between August 1, 2022, and July 31, 2023.
Textile and garment industry perseveres in overcoming difficulties and seizing opportunities from the market

Textile and garment industry perseveres in overcoming difficulties and seizing opportunities from the market

In recent months, Vietnam's textile and garment exports have witnessed a strong recovery.
Trade in goods in the second half of August increases over US$ 5 billion

Trade in goods in the second half of August increases over US$ 5 billion

VCN - The positive results in the second half of August rose the total trade in goods of the whole country in the month to US$ 512.31 billion, up 17% year-on-year.
Mobile Version