PM pledges support if global minimum tax applied

The global minimum tax was agreed upon by G7 member states in June 2021 to prevent multinational corporation tax-evasion. However, Vietnam analysts worry the additional taxation would deter in foreign direct investors here, many of whom are attracted to Vietnam’s preferential tax policies.

The 15% tax would be applied to multinational firms with a consolidated revenue of at least €750 million ($800 million) in at least two of the most recent four years.

Certain regions like the U.K., Japan, South Korea and the EU expect to apply the tax starting next year. The policy is being considered in Vietnam.

At a Saturday conference with foreign investors, Prime Minister Pham Minh Chinh said the government would help companies and investors navigate the business environment in Vietnam should the tax eventually be applied here.

Such solutions would include support with land access, costs for scientific research, human resource training and infrastructure, he said.

“Vietnam would provide a timeline to apply the global minimum tax on the basis of learning from international experience, and making sure that it is appropriate for the country’s situation,” Chinh explained.

Foreign businesses have said they want Vietnam to provide benefits and measures to cope with a worsening investment environment.

Nitin Kapoor, co-chair of the Vietnam Business Forum (VBF), said the government should look into the impacts of such a tax on the interests of investors and Vietnam’s business environment. Solutions must make sure to compensate for businesses’ interests if tax benefits are diminished or canceled due to the impacts of the global minimum tax, he added.

Dominik Meichle, general director of Bosch Vietnam, said he hopes Vietnam can create a stable and predictable business environment. He said potentially applying the global minimum tax in 2024 may affect tax benefits for investors, as well as investments’ effectiveness and policy transparency.

The government should re-evaluate support packages for businesses and provide replacements to help businesses retain their presence in the country after a global minimum tax is applied, he said.

Gabor Fluit, chairman of EuroCham, said Vietnam needs bold decisions, innovations and breakthroughs to maintain its growth momentum.

“The government should provide support policies that are appropriate and competitive to attract investment,” he said.

Approval procedures

FDI businesses have also reported a need to improve Vietnam’s investment environment in general by simplifying administrative procedures.

Hong Sun, chairman of Kocham, said several South Korean businesses investing in Vietnam are considering increasing their capital here in fields like energy and finance—but only if the investment environment remains stable.

But such businesses are having trouble with the approval of work permits for foreign workers, as well as difficulties regarding the approval of fire safety infrastructure.

Kim Sung Hun, general director of Amkor Technology Vietnam, proposed that authorities make administrative procedures regarding construction and fire safety easier by increasing the number of entities for approval processes, as well as creating an online Q&A system.

Greb Testerman, chairman of Amcham, said Amcham members are worried about the lack of stability in policies regarding electricity, and want Vietnam to hasten the approval process for clean energy projects, the governmental portal reported.

The government should complete and deploy an energy development plan, as well as the DPPA mechansim to encourage renewable energy producers to participate in contracts for direct power purchases, he added.

Fluit said clean energy is a catalyst for investment and economic growth, and that European businesses depend a lot on renewable energy. Mechanisms for direct power purchases would allow renewable energy producers, especially factories in industrial complexes, to participate in such mechanisms, he added.

Michael Michalak, ASEAN managing director of the U.S.-ASEAN Business Council, said he wants the approval procedures for energy projects to be simplified and shortened.

PM Chinh said Vietnam always creates opportunities for investors because their successes are also Vietnam’s.