Global minimum tax delay causes double loss for State and FDI enterprises

Vietnam currently has 1,015 foreign-invested enterprises (FDI) whose parent companies are subject to the global Minimum Tax. If the country applies the Global Minimum Tax, countries with parent companies will receive an additional tax difference in 2024 of about VND 12,000 billion.

Typical is the case of Samsung Vietnam Co., Ltd. As Korea applies the Global Minimum Tax from next year, Samsung estimates that in the fiscal year 2024, it will have to pay an additional $400 million in tax to Korea. If calculated for the whole tax incentive period in Vietnam, the total tax difference to be paid is estimated at 6.5 billion USD.
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In a report to the Government, the Ministry of Finance said that if applying the preferential tax rate of the current Law on Corporate Income Tax, the total tax payable by enterprises during the operation period will be higher than using the Minimum Tax global 15%. The Ministry of Finance cited, as an example, an enterprise with a stable taxable income of VND 100 billion/year. According to the current Law on Corporate Income Tax, enterprises have to pay a total tax of VND 765 billion during the operation period. If applying the Global Minimum Tax, businesses only pay 750 billion VND. In the case of the same revenue of 100 billion VND/year and the steady growth of 5%/year, when receiving incentives according to the current Law on Corporate Income Tax, enterprises pay a total tax of VND 3,861 billion during the operation period. Meanwhile, if the global Minimum Tax is imposed, enterprises only pay 3,140 billion VND.

Canon Vietnam Co., Ltd, which is one of the businesses affected by applying the Global Minimum Tax, proposed that the authorities should support several solutions. Accordingly, Canon Vietnam supports electricity bills, social insurance, health insurance, unemployment insurance, and a disaster prevention fund. Additionally, functional agencies support other costs such as housing allowance, shuttle bus, labor training, land rent, and non-management of the industrial park. Support expenses made under this month's expense mechanism will be deducted from the next month's payable tax amount.

With the same proposal, Competition Team Technology Co., Ltd (a Foxconn Group - Taiwan subsidiary) wishes to support offsetting the original fixed asset cost and keeping dormitory costs for workers.

Also read: Concern over global minimum tax » Breaking News, Latest World News Updates - VietReader Viet Nam

Slowing down will "lose" tens of trillions of billions/year

Economic expert Dinh Trong Thinh said that Vietnam needs to study and implement the domestic minimum tax as soon as possible to maintain the right to collect additional taxes. At the same time, keep the investment environment competitive. Suppose the domestic minimum tax regulation is applied. In that case, Vietnam will have the right to levy additional taxes on FDI enterprises enjoying an actual tax rate lower than the minimum 15%, thereby increasing budget revenue.

"Vietnam implementing a minimum domestic tax can spend the extra tax revenue for infrastructure development, human resource training, and technology investment. At the same time, using resources from this tax revenue to support FDI enterprises. If the global Minimum Tax is delayed, Vietnam will lose its "right to tax." Tens of trillions of VND in tax difference each year, businesses still have to pay back to the country, while the State needs more resources to continue supporting industries, "said Thinh.

With the same opinion, Dr. Can Van Luc, chief economist of the Joint Stock Commercial Bank for Investment and Development (BIDV), noted the difference in Corporate Income Tax when applying the Global Minimum Tax; FDI enterprises still have to pay when Vietnam did not get it. Moreover, Vietnam has yet to keep up with the trend of integrating into the global game and lost the opportunity for even more substantial reform.