Recently, Vietnam's National Assembly decided to increase the effective tax rate for foreign companies from 2024, a move that has sparked widespread discussion and attention. Vietnam has been enjoying all kinds of things for many yearsTax incentivesof large multinationals will face an increase in the tax rate from 5% to 15%. This measure is expected to affect 122 companiesForeign companiesand bring about $14.6 billion per year to Vietnam**TaxesRevenue. However, people are beginning to question whether Vietnam is following Xi India's example and treating foreign companies as "leeks".Actually, things are much more complicated than they seem, so let's dive in.
This decision is essentially Vietnam's response to the OECDInternationalTaxesPositive response and implementation of institutional reform initiatives. In October 2021, the OECD announced that 136 countries and territories around the world had agreed to proceedInternationalTaxesInstitutional reform, which has two main focuses. First of all, for multinational companies with a global presence, it is not only necessary to have a headquarters locationPaying taxes, which must also be in the country of operationPaying taxes。Secondly, it will be the lowest in the worldCorporate tax rateSet at 15% for all annual income over 7All multinationals of €500 million must apply this tax rate. Vietnam's move to raise the tax rate can be seen as a response to this initiative and concrete measures. When the OECD was appealing to countries, its secretary-general personally stepped in to call the reform rightDeveloping countriesVery advantageous. After the reform is implemented, $125 billion in profits from about 100 large global multinationals will be redistributed to countries. Although the benefits of this reform outweigh the disadvantages from the perspective of data measurement, the situation may not be so simple for Vietnam, which is still highly dependent on foreign investment.
OECDInternationalTaxesInstitutional reform initiatives are being pursued on a global scaleTaxesAn important measure for the system to usher in an important breakthrough. Multinational corporations on a global scale often take advantageTaxesDifferential tax avoidance, to the countriesTaxesThe journey brought great challenges. Against this backdrop, countries are desperate to achieve fairer and more equitable reformsTaxesAssignment. According to statistics, 9,000 of the world's approximately 40,000 multinational companies have their headquarters in tax havens. This means that many countries may faceTaxesThe shortfall in revenue has seriously weakened the sustainable development capacity of the country's finances. OECDInternationalTaxesThe promotion of institutional reform initiatives will help to solve this problem and achieve global resultsTaxesof fairness and reasonableness.
Vietnam has been approved by foreign investors since 1987InvestmentsSince the bill, efforts have been made to attract foreign capital. After years of development, Vietnam has finally become a favored destination for foreign capital in Southeast AsiaInvestmentsDestination. According to the British company IHSMARKIT and the United StatesUniversity of TennesseeJointly released a report that Vietnam attracts globallyForeign direct investmentranked 25th, ahead of countries such as Indonesia, the Philippines and Thailand. However, in reality, VietnameseEconomyDevelopment is still highly dependent on foreign investment. According to HSBC's research data, it is clear thatForeign direct investmentIt's VietnamEconomyAn important pillar of growth, accounting for 4%-6% of Vietnam's GDP as of the end of 2020Foreign direct investmentThe total has reached $438 billion. This tax rate adjustment may lead to foreign investment in VietnamTotal amount of investmentdecline, for dependence on foreign capital, for VietnamEconomyThe negative impact cannot be ignored.
Vietnam has long been committed to creating goodInvestmentsenvironment, attracting the entry of foreign capital. ** Various preferential policies and offersTax incentivesMake Vietnam a foreign countryInvestmentsOne of the top destinations. Vietnam**InvestmentsThe department also announced,InvestmentsHigh-tech companies with more than VND 12 trillion will enjoy cash subsidies to cover a number of costs such as training, research and infrastructure. Although the specific details have not yet been announced, according to people familiar with the matter, it may be difficult for the affected companies to meet the criteria for enjoying the preferential conditions. For Vietnam, how to:TaxesAfter the policy adjustment, it attracts moreForeign direct investment, became an important task.
Vietnam's decision to raise the tax rate for foreign companies has aroused widespread concern and discussion. On the one hand, some people believe that this is a further increase in Vietnam's supervision and levy on foreign enterprises in order to keep up with global standards. However, on the other hand, there are concerns that the move may give VietnamEconomyDevelopment has a negative impact. Vietnam has long been known for its low labor**, well-developed infrastructure, and lowBarriersand other advantages to attract foreign investment and undertake the transfer of industrial chains. However, although Vietnam has made some achievements in undertaking the industrial chain, as a country that has not yet fully industrialized and modernized, it is difficult to shake China in the worldEconomyin the position. So for Vietnam, how to do itTaxesAfter the adjustment, we will continue to attract foreign investment and promoteEconomyDevelopment remains an important challenge.
For Vietnam, raising the tax rate for foreign companies is an important decision aimed at aligning with the worldTaxesInstitutional reform is consistent and increases the number of countriesTaxesRevenue. However, this decision will inevitably have an impact on foreign investmentInvestmentsand VietnamEconomyDevelopment has an impact. Vietnam** needs to be adjustedTaxesAt the same time, effective measures should be taken to attract foreign investment and promoteEconomyStructural transformation and industrial upgrading. This needs to be further improvedInvestmentsenvironment, strengthening infrastructure construction, enhancing innovation capabilities, etc. Globally, countries need to explore how to balance countriesTaxesrequirements and attractiveness to foreign capital, realizedTaxeswithEconomyA win-win.