ASEAN needs to collaborate for better tax policy: report

ASEAN and all member states must collaborate to establish a better tax policy system to build sustainability and resilience across the region, found a report launched on Thursday in Ha Noi.

Nguyen Duc Thanh, VEPR’s Chief Advisor, speaking at the launch of the report “Towards Sustainable Tax Policies in the ASEAN Region”.— Photo VEPR

The report 'Towards Sustainable Tax Policies in the ASEAN Region: the Case of Corporate Tax Incentives' by the Viet Nam Institute for Economic and Policy Research (VEPR), Oxfam, Tax and Fiscal Justice Asia (TAFJA), the PRAKARSA and Viet Nam Tax Justice Alliance (VATJ) proposed solutions for ASEAN to improve policies and actions for increasing domestic revenue to fund public goods.

With ASEAN suffering from unprecedented economic inequality, the region has struggled to invest sufficiently in public goods due to a lack of tax revenue. Raising revenue was critical to overcoming interrelated challenges like high levels of poverty, widening inequality and the climate crisis while recovering from the COVID-19 pandemic, the report found.

The report cited statistics that 11 per cent of ASEAN's 653.9 million people struggled in poverty well before COVID-19 and this number might go up rapidly with economic activities slowing and recovery a long way away.

The governments were handicapped in spending on public wellbeing, and all ASEAN countries would likely face budget deficits in 2020 at an average of 4.2 per cent of GDP, compared to the average budget deficit of 1.5 per cent of GDP in 2018.

Some countries were also heavily indebted. With escalating spending to battle the pandemic, its economic fallout, and falling tax revenues due to crippled productivity, deficits and debt were likely to keep mounting, according to the report.

The report pointed out that in ASEAN, revenue collection levels as a ratio to GDP remained very low in comparison to other regions. In 2018, the ASEAN average was 19.1 per cent of GDP, less than half of that of the Organization for Economic Co-operation and Development (OECD) countries and lower than the average of Latin America and the Caribbean.

“Now, more than ever, ASEAN and the member states must collaborate and agree upon a common minimum standard for corporate tax incentives in the region. They need to prevent harmful tax practices that drain essential public revenue and create self-destructive competition among members,” Nguyen Duc Thanh, VEPR’s Chief Advisor, said.

“The tax incentives have helped big corporations to prosper at the expense of Asian people. This must come to an end. ASEAN must blacklist - draw a line - and say no to harmful tax incentives which drastically deplete much needed national revenues. If any incentives are to be allowed, they must only be meaningful investments that benefit the people, with no exceptions,” Thanh stressed.

 

Countries in ASEAN were still highly dependent on revenue from corporate income tax (CIT). However, they were giving up huge amounts of revenue by offering large tax incentives to foreign investors and were losing a significant amount of potential tax revenue, about 6 per cent of GDP in Cambodia and 1 per cent of GDP in Viet Nam.

Of note, countries in the ASEAN region were competing with one another in a disastrous race to the bottom by reducing their CIT rates and offering aggressive tax incentives to foreign multinationals.

The report pointed out that across the region, the average CIT rate had fallen over the last 10 years, from 25.1 per cent in 2010 to 21.7 per cent in 2020. Taking into account tax holidays of up to 20 years and other enormous profit-based incentives offered to multinationals by some countries, the effective corporate tax rate is on average 9.4 percentage points lower.

“ASEAN countries with similar economies often compete with each other by offering greater incentives than their peers in order to attract investments from multinationals, rather than coordinating their actions to secure collective gains. The process of shifting production from China to the ASEAN region may worsen this competition between countries, as they seek to attract FDI inflows to further their own interests in boosting economic development, without seeing the wider regional picture,” the report wrote.

Tax incentives tend to create an unfair investment environment for small and medium-sized local companies. In Viet Nam, the effective CIT rate for foreign companies in the manufacturing sector in 2016 was 8 per cent but for domestic companies, it was 14.5 per cent, and it was even higher for large State-owned enterprises at 16 per cent.

“ASEAN member states need to collaborate and discard 'beggar-thy-neighbour' tax policies, including race-to-the-bottom tax incentives that translate into lost revenues which have left poorer countries and people struggling to make ends meet," Ah Maftuchan, Co-coordinator of TAFJA said.

According to the report, the region needs to set up a blacklist of tax incentives to phase them out across the region. They should agree on a whitelist of tax incentives that are acceptable and allowed. A transparent and accountable mechanism should be put in place at the ASEAN level to monitor developments in tax policy and to decide which incentives should be blacklisted or whitelisted.

Besides, ASEAN need to agree on a common minimum tax standard. The appropriate rate may range from 12.5 per cent to 20 per cent to protect countries’ domestic tax revenues and stop the beggar-thy-neighbour approach to policy making.

Finally, ASEAN need to agree on rules for the good governance of tax incentives. — VNS

 
 

Other News

.
Investment into local start-ups expected to rise this year
Investment into local start-ups expected to rise this year
BUSINESSicon  01/06/2021 

The investment capital into Vietnamese start-ups this year would see a breakthrough despite a year-on-year decrease of 48 per cent in 2020 to reach US$451 million.

New master plan for seaports needed to further boost economic development
New master plan for seaports needed to further boost economic development
BUSINESSicon  01/06/2021 

A new master plan for seaports is needed to further boost the country’s socio-economic development in the rapid international integration process, experts have said.

Realty tax needs revamp to ensure fairness
Realty tax needs revamp to ensure fairness
BUSINESSicon  31/05/2021 

Realty tax not only creates sources of collection for the State budget but also is a policy able to spur growth and reduce bribery related to land. Vietnam does have realty tax.

Market will continue to breach new highs, but investors should be more cautious: experts
Market will continue to breach new highs, but investors should be more cautious: experts
BUSINESSicon  31/05/2021 

The market witnessed strong buying interest last week and analysts from many securities firms expect indices to continue to hit new highs, but have warned investors to be cautious.

E-commerce changing domestic retail property market
E-commerce changing domestic retail property market
BUSINESSicon  31/05/2021 

The shift toward e-commerce due to the COVID-19 pandemic has brought challenges to Vietnam’s retail property market, according to Savills Vietnam.

Customs sector helps exporters utilise benefits of FTAs
Customs sector helps exporters utilise benefits of FTAs
BUSINESSicon  30/05/2021 

The customs sector will continue to introduce measures to help Vietnamese enterprises fully tap the benefits brought about by FTAs Vietnam has signed with foreign partners, an official from the General Department of Vietnam Customs has said.

CPI inches up 0.16 percent in May
CPI inches up 0.16 percent in May
BUSINESSicon  30/05/2021 

Vietnam’s consumer price index (CPI) in May was up 0.16 percent agaisnt April and 2.9 percent from last year, reported the General Statistics Office (GSO) on May 29.

Major transport infrastructure works to be started in June
Major transport infrastructure works to be started in June
BUSINESSicon  30/05/2021 

Four major transport projects will be kicked off in June, announced the Ministry of Transport at a conference on May 28.

Lending interest rates about to increase
Lending interest rates about to increase
BUSINESSicon  30/05/2021 

Recently, the interbank interest rates suddenly jumped, causing many people to worry whether bank lending rates will increase in the coming time while the business and production activities have been facing many difficulties due to Covid-19.

HCMC to try reigniting delayed BT projects
HCMC to try reigniting delayed BT projects
BUSINESSicon  30/05/2021 

Financial shortcomings of investors combined with the government’s failure to offer support are some of the reasons multiple BT infrastructure projects in HCMC are being delayed indefinitely, experts said. 

Firms should facilitate Gen Z to develop
Firms should facilitate Gen Z to develop
BUSINESSicon  30/05/2021 

Enterprises should consider applying new thoughts or amend regulations to meet the demand of Gen Z, including those born in 1996-2010, and create favorable conditions for them to develop as they will be an important part of the country’s workforce.

Vietnam credit growth forecast to hit 14% in 2021: Fitch Solutions
Vietnam credit growth forecast to hit 14% in 2021: Fitch Solutions
BUSINESSicon  30/05/2021 

A GDP growth of 5.8% in 2021, nearly double the 2.9% growth last year, would boost credit demand.

VIETNAM BUSINESS NEWS MAY 31
VIETNAM BUSINESS NEWS MAY 31
BUSINESSicon  31/05/2021 

New COVID-19 outbreak puts brakes on trade, transport

More Vietnamese agro products to be available on e-commerce platforms
More Vietnamese agro products to be available on e-commerce platforms
BUSINESSicon  29/05/2021 

Following successful sales of lychees, efforts have been made to sell other Vietnamese farm produce on e-commerce platforms, the Nong nghiep Viet Nam (Vietnam Agriculture) newspaper has reported.

Debt burden risks budget stability
Debt burden risks budget stability
BUSINESSicon  29/05/2021 

Vietnam has had outstanding economic development in recent decades, even through the pandemic so far. 

Paint makers’ fresh coat of progress
Paint makers’ fresh coat of progress
BUSINESSicon  29/05/2021 

Having one of the fastest-growing paint and coating industries in the Southeast Asian region, Vietnam is mainly dominated by international paint and coating groups, but it is now witnessing a refresh as local makers attempt to gain some traction.

Many factors behind rising inflation
Many factors behind rising inflation
BUSINESSicon  31/05/2021 

The 2020 Consumer Price Index (CPI) in Vietnam was contained at 3.23%, but which will be difficult to maintain at a target of 4% in 2021.

'Black-credit' lenders pose serious threat to borrowers
'Black-credit' lenders pose serious threat to borrowers
FEATUREicon  28/05/2021 

Experts have repeatedly rung the alarm bell over black credit, which is causing serious consequences to families and society.

70% of VN adults use banking services but many lack access to credit
70% of VN adults use banking services but many lack access to credit
BUSINESSicon  30/05/2021 

According to the State Bank of Vietnam, by 2020, 70% of adults in Vietnam had a bank account, but nearly half of them did not have access to credit. 

Vietnam stops importing pigs from Thailand
Vietnam stops importing pigs from Thailand
BUSINESSicon  29/05/2021 

The Ministry of Agriculture and Rural Development has sent a document to the Thai Embassy on the suspension of imported live pigs from Thailand into Vietnam.

 
 
 
Leave your comment on an article

OR QUICK LOGIN