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Vietnam takes step towards global minimum tax to boost investment

HANOI, March 22 (Xinhua) -- A global deal to ensure multinational companies pay a minimum tax rate of 15 percent will force Vietnam to change the way it attracts foreign investors, local newspaper Vietnam News reported on Wednesday.

Vietnam has been pursuing a range of fiscal policies for years aimed at luring foreign investments into the economy by offering tax relief and incentives.

While more than 130 countries, representing about 90 percent of global gross domestic product (GDP), backed an agreement since 2021 to prevent global companies from stashing profits with a global minimum tax of at least 15 percent that would apply to companies with annual revenues above 750 million euros.

The minimum tax rule, effective from 2024, aimed to make it harder for multinational companies to avoid taxation.

When it comes into force, tax incentives would no longer give Vietnam a competitive advantage in attracting foreign investment, said Do Van Su, deputy director of the Foreign Investment Agency under the Ministry of Planning and Investment, urging the government to promptly adapt to the change by developing new investment incentives.

Tax incentives, however, are not the only instruments that governments use to stimulate economic growth as foreign investors consider many other factors, including business environment and market growth potential, said Takeo Nakajima, chief representative of the Japan External Trade Organization.

About 70 percent of respondents surveyed by the European Chamber of Commerce said Vietnam could increase foreign investment inflows by reducing roadblocks in administrative procedures, 53 percent suggesting infrastructure improvements, 35 percent calling for skilled personnel and 47 percent looking towards lower visa barriers for foreign experts.

Prime Minister Pham Minh Chinh said at a business forum last weekend that the government is developing new policies, scheduled for completion this year, in line with the global minimum tax and on the principle of creating a favorable business and investment environment in Vietnam.

Foreign direct investment disbursements in the Southeast Asian country rose 13.5 percent to 22.4 billion U.S. dollars in 2022 from a year earlier, while investment pledges were down 11 percent to 27.72 billion dollars, said the Ministry of Planning and Investment in a statement.

Vietnam is targeting a GDP growth of 6.5 percent for this year after growing at the fastest pace since 2011 to 8.02 percent in 2022.