VietNamNet Bridge – The Managing Partner of KPMG in Vietnam and Cambodia has underlined the importance of the proposed corporate income tax (CIT) rate reduction as it will provide Vietnam with a better platform to compete with other nations in the region and around the world.
Warrick A. Cleine underscored the importance of the proposed cut in the standard CIT rate from the current 28% to 25%, which is one of the key proposals by the Government being debated at the third sitting of the 12th National Assembly in Hanoi.
"A cut of three percentage points in the headline CIT rate is great news, and very important," Cleine told more than 140 participants at a luncheon on Vietnam's tax updates organized in HCMC on Tuesday by the European Chamber of Commerce in Vietnam (EuroCham) in collaboration with other foreign business groups here.
The sole speaker of the Annual EuroCham-KPMG Tax Update Seminar told the Daily after the luncheon that the reduction was one of the key changes to the CIT Law.
The rate cut is important for the reason that foreign investors consider it before making a decision to invest or expand their business in Vietnam, or to invest in neighboring countries such as Thailand, Malaysia, Singapore and other regional countries where they enjoy a lower rate.
Lower CIT rate was discussed by the National Assembly deputies on the second day of their on-going session, which began on May 6. Many of them said the current rate was higher than that of 25% in China and 19% in Singapore and wanted a reduction to make Vietnam a more attractive destination for investors.
However some deputies did not support lower CIT rate for fear of tax revenue loss, estimated at VND5tril (some US$310mil) a year if a CIT reduction of three percentage points was passed. This will result in less investment in public facilities.
They furthered that the existing CIT rate was still lower than the rate of 30% in Thailand and the Philippines.
Cleine said the Government would have many sources to compensate for the tax loss, from the oil and gas industry to value-added tax and the newly introduced Law on Personal Income Tax.
"You have to remember that the economy is growing in Vietnam... more tax revenue will come from VAT and CIT when companies grow and make more profits."
He stressed that lower CIT encouraged companies to reinvest their profits, meaning they pay more tax and leading to an increase in the total tax revenue.
Cleine said CIT was one of the costs of doing business.
"The proposed reduction could be seen as a response to China's recent CIT rate drop - a 'China Plus One' strategy is still a very relevant strategy influencing individual FDI decisions, so when comparing Vietnam with other Southeast Asian nations, the headline rate of CIT is an important factor," he said.
He noted that Vietnam's proposed CIT rate drop was further progress down a set path for the Vietnamese business community, who paid 32% prior to 28%.
Cleine also supported the proposal in the draft CIT law allowing companies to spend more of their total expenses on research and development, as this "could be a great boost for Vietnam's R&D effort... (and would) incentivise a particular spending strategy rather than an investment strategy."
(Source: SGT)
Warrick A. Cleine underscored the importance of the proposed cut in the standard CIT rate from the current 28% to 25%, which is one of the key proposals by the Government being debated at the third sitting of the 12th National Assembly in Hanoi.
"A cut of three percentage points in the headline CIT rate is great news, and very important," Cleine told more than 140 participants at a luncheon on Vietnam's tax updates organized in HCMC on Tuesday by the European Chamber of Commerce in Vietnam (EuroCham) in collaboration with other foreign business groups here.
The sole speaker of the Annual EuroCham-KPMG Tax Update Seminar told the Daily after the luncheon that the reduction was one of the key changes to the CIT Law.
The rate cut is important for the reason that foreign investors consider it before making a decision to invest or expand their business in Vietnam, or to invest in neighboring countries such as Thailand, Malaysia, Singapore and other regional countries where they enjoy a lower rate.
Lower CIT rate was discussed by the National Assembly deputies on the second day of their on-going session, which began on May 6. Many of them said the current rate was higher than that of 25% in China and 19% in Singapore and wanted a reduction to make Vietnam a more attractive destination for investors.
However some deputies did not support lower CIT rate for fear of tax revenue loss, estimated at VND5tril (some US$310mil) a year if a CIT reduction of three percentage points was passed. This will result in less investment in public facilities.
They furthered that the existing CIT rate was still lower than the rate of 30% in Thailand and the Philippines.
Cleine said the Government would have many sources to compensate for the tax loss, from the oil and gas industry to value-added tax and the newly introduced Law on Personal Income Tax.
"You have to remember that the economy is growing in Vietnam... more tax revenue will come from VAT and CIT when companies grow and make more profits."
He stressed that lower CIT encouraged companies to reinvest their profits, meaning they pay more tax and leading to an increase in the total tax revenue.
Cleine said CIT was one of the costs of doing business.
"The proposed reduction could be seen as a response to China's recent CIT rate drop - a 'China Plus One' strategy is still a very relevant strategy influencing individual FDI decisions, so when comparing Vietnam with other Southeast Asian nations, the headline rate of CIT is an important factor," he said.
He noted that Vietnam's proposed CIT rate drop was further progress down a set path for the Vietnamese business community, who paid 32% prior to 28%.
Cleine also supported the proposal in the draft CIT law allowing companies to spend more of their total expenses on research and development, as this "could be a great boost for Vietnam's R&D effort... (and would) incentivise a particular spending strategy rather than an investment strategy."
(Source: SGT)
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