Fiscal policy maintains and ensures national financial security

VCN - At the 2023 Financial Forum, speaking at the session "Financial policy overcomes challenges to promote economic growth and development", Regional Resident Representative for Vietnam, Cambodia, Lao PDR, Jochen Schmittmann believes that tax incentives are only a secondary factor in attracting investment and the global minimum tax is an important initiative to avoid a "race to the bottom" on preferential tax rates among countries in attracting foreign investment.
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Experts speak at the Forum

Implementing a global minimum tax policy also helps eliminate loopholes in management

Mr. Jochen Schmittmann said that many countries are preparing to implement a global minimum tax to create a fair playground. The implementation of the global minimum tax policy also helps eliminate loopholes in management and prevent FDI enterprises from tax evasion and transfer pricing. It is estimated that Vietnam’s revenue from FDI will earn about 0.2% of GDP from applying global minimum tax.

According to Mr. Jochen Schmittmann, if the global minimum tax policy is applied, it will greatly affect large investors, but small and medium-sized investors in Vietnam, and tax incentives are not the main reason to attract FDI into Vietnam. The factors that attract investors to Vietnam are the political environment, quality and qualification of human resources.

However, he also pointed out that the current shortcomings in attracting investment in Vietnam are infrastructure; approval processes, credit processing, credit granting, and business environment. Vietnam should spend part of the proceeds from the global minimum tax to invest in infrastructure and electricity systems.

Assessing the impact and role of fiscal policy in supporting people and businesses to economic recovery and development, Mr. Truong Ba Tuan, Deputy Director of the Department of the Tax Policies, fees and charges Supervisory Authority under the Ministry of Finance said that since 2020, when the Covid-19 pandemic broke out, it had a profound impact on the world economy, including Vietnam.

Faced with that situation, the Ministry of Finance has advised the Government and the National Assembly to promulgate many tax and fee solutions, which have made an important contribution to restoring and promoting production and business.

Entering 2023, developments at home and abroad continue to be complicated and unpredictable, directly affecting production and business. Therefore, the Ministry of Finance continues to research and offer according to its authority, submit to the Government and submit to the National Assembly Standing Committee to continue to offer solutions to support people and businesses to restore production and business.

Accordingly, the support scale in 2023 is about VND196 trillion, the deferred tax amount is VND121 trillion, and the exempted and reduced amounts of some taxes, fees and charges are about VND13 trillion.

Deputy Director of the Department of the Tax Policies, fees and Charges Supervisory Authority emphasized that the solutions issued by the Ministry of Finance have been appreciated by people, businesses and the public.

Mr. Truong Ba Tuan also said that to have the right policies, it is necessary to promptly identify and evaluate developments to proactively advise the Government and the National Assembly, and closely coordinate between fiscal policies and relevant policies.

“It is necessary to carefully evaluate the impact of policies, to choose appropriate ones to support people and businesses, contributing to macroeconomic stability, ensuring the role of fiscal policy and the national financial security", said Mr. Truong Ba Tuan.

Minimizing cross-ownership and manipulation of the financial system

Discussing at the Forum, Dr. Huynh The Du, Fullbright University Vietnam also shared his comments, opportunities and challenges for 2024. Dr. Huynh The Du said that in 2024 the world economy will grow more slowly than in 2023, along with difficulties from within the economy, which will create challenges for Vietnam's 2024 budget. The target for budget revenue in 2024 is to increase by 5%, while Vietnam continues to implement an environmental protection tax on gasoline and reduce the VAT rate by 2% in the first 6 months of 2024.

Therefore, Mr. Du said that the Government needs to consider several policies, in which the State plays an active role, specifically, more expansive fiscal policy and reserves capital for key investment projects in key regions. Along with that, there needs to be a policy for the financial system to develop healthily, minimizing cross-ownership and manipulation of the financial system...

Commenting on the issue of green energy transition at the session, the Deputy Head of Cooperation, Delegation of the European Union to Vietnam said that the EU is a Just Energy Transition Partnership (JETP) with Vietnam. JETP will mobilize an initial US$15.5 billion from public finance and the private sector over the next 3 to 5 years to support Vietnam's green transition (i.e. reducing greenhouse gas emissions and eliminating the use of coal energy).

Last October 2023, the European Investment Bank (EIB) signed a Memorandum of Understanding with Vietnam to provide a multi-project credit facility worth EUR 500 million to support JETP-related projects.

In addition, the EU has financed EUR16.6 million in technical assistance to support Vietnam Electricity (EVN) in JETP-related projects. The EU is also supporting Vietnam with reforms in the energy sector, including conditions on renewable energy, energy efficiency, and transmission lines/grids. This is made possible through a EUR 142 million budget support program for the Sustainable Energy Transition.

Balancing budget and public debt contributes to ensuring national financial security Balancing budget and public debt contributes to ensuring national financial security

The EU representative emphasized that Vietnam is taking a leading role in implementing JETP with the support of the EU, member states and remaining development partners.

By Hoai Anh/ Huyen Trang

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