Vietnam has been quite successful in attracting FDI in flows since implementation
of Doi Moi in 1986. By 2013, FDI in flows had reached US$19.2 billion a year, an
astounding increase of 65.5% over the previous year’s FDI 1. By the 4th quarter of
2013, the Vietnamese economy had surpassed the government’s target of US$
13‐14 billion in annual FDI contributions.
The current trend of above‐average FDI in flows is expected to continue through
2015, according to the National Financial Supervisory Committe (NFSC), due to
improving global economy and increased FTAs with trading partners.
In general, FDI has boosted industrial and exports growth, created more jobs, and
it has also significantly impacted on Government revenue. However, as a result of
decreasing (low) Corporate Income Tax (CIT), tax exemptions and tax avoidance
practied by some companies, government losses US$20 million out of its potential
revenue annually. The Government’s law and policy enforcement and monitoring
efforts further aid to this cost.
This policy brief highlights the cost of tax incenties and tax avoidance to Vietnam
and offers policy options to ensure FDI without necessarily reducing CIT. The policy
brief draws from a national tax research carried out in 2014 by Actionaid Vietnam
in collaboratin with Vietnam Tax Consultants Associatin titled “Vietnam’s tax
policies with objecties of equality, efficiency, economic growth promotion, poverty
reduction and elimination”