Vietnamese experts are concerned that if many nations adopt the global minimum tax rate (GMTR) next year as planned, it would discourage foreign firms from locating their operations in low-tax countries. GMTR would cancel the tax incentives that Vietnam has offered for years and lead to tax revenues being effectively shifted to those countries, they feel.

Deputy director of the country’s general department of taxation Dang Ngoc Minh estimated that 1,015 FDI companies operating in Vietnam would be hit by the global tax regulation.

Global corporations in the country are enjoying tax rates of between 2.75 per cent and 5.95 per cent, far lower than the GMTR of 15 per cent, he said, adding that GMTR would cost Vietnam a couple of billions of dollars in tax loss every year.

Under GMTR regulations, corporations with more than €750 million in annual revenue would be subject to an effective tax rate of at least 15 per cent, not including deductions for depreciation and certain tax credits.

Its introduction is aimed at raising compliance costs and creating a level-playing field between developed and developing countries.

The European Union (EU) has agreed to implement the rate on January 1 next year. Japan followed suit with the enactment date being April 1, 2024. Several others, including Indonesia, Malaysia, and South Korea, are preparing legislation to adopt GMTR.

Several private sector experts urged Vietnam to adopt GMTR without delay, or else risk losing out to others on the differential tax revenues, according to Vietnamese media reports.

Fibre2Fashion News Desk (DS)

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