Analysts say Vietnam should stop depending on tax incentives to attract FDI and instead focus on improving the business environment and quality of labor as a minimum corporate tax looms.

As foreign direct investment (FDI) business representatives and analysts gathered at an investment forum Wednesday morning, Deputy CEO of Deloitte Vietnam Phan Duc Hoang said that the new global minimum corporate tax was designed to block multinationals from tax avoidance.

Starting next year Vietnam is set to apply a 15% tax on profits from multinationals with total revenues of at least EUR750 million ($819 million) in two of the preceding four years.

Hoang said if a South Korea-based company that has a factory in Vietnam is paying taxes for less than 15% of its profits, it will be taxed in South Korea to ensure the 15% level is achieved.

If South Korea does not also implement the extra tax on the company, other countries that have approved the new global minimum corporate tax, such as Indonesia and Thailand, will have the rights to impose the tax, he added.

For this reason, Do Thien Anh Tuan from the4 Fulbright School of Public Policy and Management, forecast that Vietnam will have to be prudent in imposing the tax.

The country has been giving tax incentives for over 10 years to FDI companies, and this shows that increasing state coffers for now is not the main goal, he added.

“We want to attract FDI to create jobs, increase exports and develop industries,” he said, predicting that the government will continue to uphold its promised incentives to protect the country’s reputation.

Tuan also said that instead of relying on tax incentives, Vietnam, and especially Ho Chi Minh City, should focus on improving the quality of labor to draw in foreign investors.

Tran Do Le Uyen, a lawyer with BR Law Firm, said streamlined administrative procedures and legal frameworks, which could help reduce costs for businesses, are main interests for foreign investors.

Tran Viet Ha, Deputy Director of the Ho Chi Minh City Export Processing and Industrial Zones Authority (HEPZA), said that time costs businesses money and therefore helping them speed up their projects is most important.

Phan Duc Hieu, a member of the National Assembly’s Economic Committee, said that the implementation of the global minimum corporate tax will prompt Vietnam to improve its business environment.

VnExpress