Overseas Investors Decry Vietnam’s Tax Policy

Tax incentives and tax policy are one of the four competitive edges Vietnam has to attract foreign investment.

Foreign enterprises in Vietnam are complaining of tax practices as well as the stability of the tax policy in Vietnam, said Dau Anh Tuan, head of the Legal Department under the Vietnam Chamber of Commerce and Industry (VCCI), referring to the Ministry of Finance's plan to review a number of tax laws.

Tax is among major factors that influence investors’ decisions. A survey that covered 2,000 foreign-invested enterprises operating in Vietnam showed that tax incentive is one of Vietnam’s four competitive edges that also include workforce and investment policy, Tuan said at a seminar held by the Ministry of Planning and Investment in Hanoi on September 19.

“The finance ministry’s scheme to revise five tax laws will not only impact the value-added tax (VAT) but also directly weigh on a series of companies in the fields of beverage, real estate, automobile, agriculture and banking,” Tuan noted, urging thorough assessment before these laws are amended.

Among its proposals, the VAT will be increased to 12% from 10% currently while the income tax rate on lottery wins will be significantly raised. Further, soft drinks will also be imposed special consumption tax, which is aimed at luxury goods currently.

He pointed out that the ministry’s plan is part of larger efforts to reshuffle state budget revenues. It has made deep cuts in fees as well as reductions to corporate income tax for small and medium enterprises.

Unfortunately, not all the revisions have brought about desired effects, Tuan stressed, taking the removal of VAT for fertilizers, animal feed and agricultural materials two years ago as an example. Actually, such an adjustment did more harm to farmers rather than support them because they did not get VAT refunds when selling agricultural products although several inputs bear a 10% VAT rate.

Tuan note that an ill-designed tax policy can deal a strong blow to the Vietnamese economy. There has been a call for both foreign and domestic firms to boost refined products instead of raw materials. However, the country’s improper tax policy in deed encourages firms to export raw materials rather than value-added products.

Tuan Minh / BizLIVE