Vietnam set up panel to find ways to stay competitive

HANOI Vietnam has set up a special panel to find ways to stay competitive when new OECD cross-border tax rules take effect, its central bank said on Tuesday, amid concerns that it could negate the benefits of its current tax incentives.

Vietnam has become a regional manufacturing hub for global electronics makers, which have been offered attractive tax rates because of its low labour costs, improved infrastructure and growing free trade access.

The Organisation for Economic Cooperation and Development is preparing to introduce a major overhaul of cross-border taxes in a generation, with 140 countries signing up to the plan, which seeks a minimum corporate tax rate of 15 per cent.

The rules will allow governments to apply a top-up tax to that level on profits booked in a country with a lower rate.

Vietnam has a corporate income tax of 20 per cent, but it can offer a rate as low as 5 per cent as well as lengthy grace periods in special cases to attract foreign investors.

The central bank will work with the Ministry of Finance and the Working Group to develop supportive policies and measures to attract foreign investment while sticking to its international commitments, the State Bank of Vietnam said in a statement.

One of the beneficiaries of Vietnam's incentives is Samsung Electronics, its largest foreign investor, which employs 160,000 people locally.

The SBV statement said Deputy Central Bank Governor Pham Thanh Ha met Samsung Vietnam's chief executive, Choi Joo Ho, on Tuesday to discuss the new tax rules.

Choi presented some measures for Vietnam to maintain the competitiveness of its investment environment, but it didn't elaborate.