Vietnam Considers Lowering Taxes to Spur Foreign Investment

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May 8 – Vietnam is considering lowering corporate income taxes from 28 percent to 25 percent.

A proposed corporate tax cut would help lure more foreign investors to Vietnam without lowering government tax revenues, said several National Assembly representatives Wednesday.

Lawmakers focused on a proposed amendment to 1997’s Corporate Income Tax Law at the National Assembly on Wednesday that would cut corporate income taxes by three percent.

In a report released at the meeting, Finance Minister Vu Van Ninh said the state coffers would lose VND5 trillion (US$310 million) per year on the tax cut.

But Ninh also said the loss could be worth its weight in economic development by allowing companies in Vietnam to become more competitive.

The NA chairman of the Financial and Budgetary Committee Phung Quoc Hien told Than Nien News that the tax cut worried him.

Many experts are convinced that high corporate taxes would not impede foreign investment, Hien said.

Deputy Nguyen Van Hien from the northern port city of Hai Phong blamed superfluous formalities, not high corporate taxes, for deterring foreign investors from Vietnam.

But a majority of lawmakers at the meeting shrugged off worries that the tax reduction would hurt tax revenues, arguing that the increasing number of business openings would offset the decrease.

The recent general trend in Asia has been to reduce corporate taxes to attract foreign investors.

While it is unlikely that a three percent tax cut alone would spur increased foreign interest in Vietnam, by matching China’s corporate tax rate, which was recently revised upward for foreign enterprises, Vietnam would eliminate one less barrier for foreign investors to consider the country over China.