Vietnam records increasing FDI from tax haven countries: Oxfam

By VnExpress   December 13, 2016 | 05:33 am PT
Vietnam records increasing FDI from tax haven countries: Oxfam
Vietnam has been an attractive investment destination, consistently drawing strong foreign capital inflows since 1986 economic reform. Photo by Reuters
Global investors are using tax havens as a transit route for massive amounts of foreign direct investment.

An increasingly large part of foreign direct investment in Vietnam is coming from tax haven countries, Oxfam said in a recent report, citing a 47 percent increase in one year.

Vietnam received an estimated $18.1 billion in new foreign direct investment (FDI) pledges from January to November this year, said the Ministry of Planning and Investment.

Singapore has retained its ranking as the country's second biggest foreign investor, after South Korea, with $2.05 billion worth of new FDI pledges accounting for 11.3 percent of the total during the period, according to the ministry. In its latest rankings of the top 15 corporate tax havens, Oxfam named Singapore the fifth worst corporate tax haven in the world.

Double taxation acts as a major hurdle to cross-border investment, so Singapore has signed agreements with many countries, including Vietnam, to provide bilateral tax relief. Singaporean holding companies enable foreign firms to take advantage of the city-state’s extensive network of comprehensive double taxation agreements.

As a consequence, developing countries like Vietnam could miss out on hundreds of millions in tax revenue each year.

Race to the bottom on corporate taxation

In an attempt to attract more business, the Vietnamese government has introduced various tax incentives, including slashing corporate taxes for foreign-invested companies.

In competition to attract investment from Samsung in 2014, Indonesia offered a corporate income tax exemption of 10 years, while Vietnam offered 15 years, said Oxfam.

ActionAid Vietnam estimated that in 2012, Vietnam lost $20 million due to tax incentives offered by the government to foreign companies.

“The tax profit that Vietnam could have collected from foreign-invested enterprises was about three times higher than the total expenditure on health care and five times larger than the total spending on nationwide education,” said Hoang Phuong Thao, country director of ActionAid Vietnam.

Corporate tax havens are costing countries huge amounts of valuable tax revenue and their use is becoming standard business practice for many companies. Oxfam found that 90 percent of the world’s biggest companies had a presence in at least one tax haven.

Oxfam estimated that developing countries, including Vietnam, lose around $100 billion annually as a result of corporate tax avoidance schemes. This amount is more than enough to provide an education for all of the millions of children currently out of school, and to pay for health interventions that could save the lives of 6 million children.

Related News:

Tax incentives cause Vietnam’s public services to suffer: ActionAid

Vietnam plans new transfer pricing rules to curb tax fraud

Tax avoidance leaves $3.4 bln hole in national budget

 
 
go to top