-
 The
recent empirical survey we carried out with VNCI on the impact
of the current CIT incentives regime for domestic companies was
conducted across 140 domestic private companies in Ho Chi Minh
City, Tien Giang province and Binh Duong province. When
enterprises were asked to rank the importance of various factors
affecting their investment decisions, incentives were ranked
seventh, below infrastructure, good human resources, local
governance, accessibility to production materials and markets
and two others. More than 80% of firms that we surveyed which
are currently receiving incentives said they would have made the
same investment decision even without the provision of those
incentives. This finding questions the effectiveness of
Vietnam's investment incentives. Furthermore, most surveyed
firms received incentives under list A of Decree 164 (i.e.
business sectors eligible for incentives), but very few have
from lists B and C (i.e. locations with difficult or very
difficult socio-economic conditions that are eligible for
incentives).
Professor Nguyen Thi Canh, National University of Ho Chi Minh
City
-
Few foreign
investors pay attention to tax incentives. Most of them are more
interested in the transparency of the investment environment,
tax regulations and practices, and especially how to calculate
taxable income and expenses. The fact that many expenses cannot
be deducted from taxable income makes the nominal Corporate
income tax rate of 28% translate into an effective rate of 42%.
Mr. Nguyen Khac Thanh, Managing Partner, Ernst & Young Vietnam
-
Incentives offered
by the host government are not the top priority of foreign
investors. When making an investment decision, most foreign
investors usually seek the following advice from investment
consulting firms, in this order of importance: 1) What are their
specific business rights? 2) How good is the legal environment?
3) What are the various tax rates? 4) Are there any incentives
available?
Mr. Ta Quoc Khanh, Deputy Director,
Consultancy and Project Development Center, InvestConsult Group
-
Our investment
incentive scheme is spread out and not sufficiently focused. We
should use incentives to target investment projects impacting
the whole economy, our economic development strategy and
industrial development plans. Existing incentives based on
locations with difficult socio-economic conditions should be
reviewed. Otherwise we are using incentives as a tool to force
enterprises to perform social functions, such as poverty
alleviation. Besides, locations with poor infrastructure
conditions may not be able to attract any investment, despite
offering a lot of incentives. Incentives for specific localities
must be more selective, in order to be better aligned with each
province's strategic objectives and strengths.
Mr. Pham Manh Dzung, Head of Legal Department, MPI
& Head of CIL Drafting Committee
-
A good encouragement
scheme should benefit a majority of investors and businesses.
However, our current incentive system does not achieve this
objective. Administrative and relationship-building expenses are
a big barrier for businesses. Only few companies that have a lot
of resources and capacity, can benefit from this system. Our
member companies are not very interested in incentives because
they are too complex. They generally think that incentives are
of little value, and have little hope of successfully applying
for them.
Mr. Pham Xuan Mai, General Secretary, Shoe and Leather
Association of Ho Chi Minh City
-
 In
order to decide which incentives should be removed and revised,
it is necessary to collaborate with various authorities, and
conduct an in-depth survey to quantify the impact of each
incentive. For example, a comparison between the benefits gained
and costs incurred for a company to get a CIT exemption is
needed. Similarly, we should compare the revenue foregone by the
government with the benefits gained for economic growth,
geographical structural changes, and employment generation. When
designing new incentives, a cost-benefit analysis of existing
and new incentives is necessary.
Mr. Nguyen Van Phung,
Deputy Head of Tax Policy Department, Ministry of Finance
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