By Francesco Guarascio and Khanh Vu
May 30, 2023 3:31 PM GMT+7
Samsung centre building is seen in Hanoi
Vietnam May 29, 2023. REUTERS/Francesco Guarascio
HANOI, May 30 (Reuters) - Samsung and other foreign companies
are pushing Vietnam to introduce a multi-million-dollar reform that would
compensate them for higher levies they face from next year under a global
overhaul of tax rules, a source involved in the talks said.
The discussions precede the introduction from January of a minimum
tax rate of 15% for large multinationals under a landmark global reform
led by the Organisation for Economic Cooperation and Development (OECD).
Vietnam has committed
to comply with the OECD rule, effectively raising the tax rate to 15% for many
of the multinationals operating in the country and who are currently taxed at a
much lower rate thanks to various sweeteners.
The global rule
requires companies paying less in a low-tax jurisdiction to face a top-up levy
in their home country.
A top-up levy means
foreign companies could pull out precious foreign exchange from Vietnam to
comply with the rule, and Hanoi's decision to implement the higher 15% tax rate
and plans for compensation are aimed at preventing this from happening.
The Southeast Asian
nation, which heavily relies on foreign investment to pump prime its
economy, fears the cross-border rule could make it less attractive to
large multinationals.
"If this is not
fully resolved, Vietnam's competitiveness will fade," said Hong Sun,
chairman of Korea Chamber of Business in Vietnam, noting that South Korean
investors were particularly sensitive to those changes.
In a meeting with
government officials in April, Korean tech giants Samsung Electronics (005930.KS) and LG Electronics (066570.KS), U.S. chipmaker Intel (INTC.O) and Germany's Bosch (ROBG.UL) were among half a dozen
large investors who pushed for compensations, the source who attended the
meeting said.
Under pressure, the
government is preparing a draft resolution that could be approved by the
Parliament in October offering partial compensations to big firms, the source
said, declining to be named because the discussions were internal.
None of the companies
replied to requests for comments.
The firms have
invested tens of billions of dollars in the country and are major employers.
Samsung, for example, is the biggest single foreign investor in Vietnam,
employs 160,000 people and produces half of its smartphones in the country,
accounting for nearly one fifth of the nation's total exports.
Samsung's tax rate
varies by district, and ranged between 5.1% and 6.2% in 2019 in the two
northern provinces where it produces smartphones, according to government data
cited by local media.
Under the proposed
compensation resolution, still subject to changes, companies with large
investments in Vietnam would be allowed to receive after-tax cash handouts or
refundable tax credits to support their manufacturing or research outlays.
The total cost of the
planned measure is estimated at several hundreds millions of dollars a year,
the source said, noting that the bill for Vietnam would amount to at least $200
million annually.
However, the costs
should roughly match the extra revenues that Vietnam is expected to raise from
the higher taxes it will be imposing on big multinationals under the new global
rules, the source said.
Smaller companies that
are not within the scope of the new global rules may also receive handouts, the
source said. This is expected to reduce potential frictions with OECD rules.
Vietnam's ministry for
planning and investment and the OECD did not reply to requests for comment.
Reporting by Francesco
Guarascio @fraguarascio; additional reporting by Khanh Vu and Phuong Nguyen in
Hanoi and Leight Thomas in Paris; Editing by Miyoung Kim and Shri Navaratnam
No comments:
Post a Comment