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

.
EVFTA expected to give a lift to real estate sector
EVFTA expected to give a lift to real estate sector
BUSINESSicon  06/07/2020 

Many segments of the real estate market are soon expected to benefit from the EU-Vietnam Free Trade Agreement, which takes effect in August.

American groups make progress across Vietnam
American groups make progress across Vietnam
BUSINESSicon  06/07/2020 

Vietnam, as one of the fastest-growing economies in the ASEAN bloc, is becoming more appealing to American investors.

A dynamic and powerful ASEAN from the German perspective
A dynamic and powerful ASEAN from the German perspective
BUSINESSicon  06/07/2020 

Possessing key features that represent a snapshot of one of the most diverse, fastest-growing, and competitive regions, the ASEAN is an attractive economic region for not only German enterprises but also other European ones to invest in. 

Delving into specifics of amended business laws
Delving into specifics of amended business laws
BUSINESSicon  06/07/2020 

Businesses and investors are expected to access new positive changes when the amended Law on Investment and the amended Law on Enterprises take effect from January 1 next year.

Rays of sunshine in aviation clouds
Rays of sunshine in aviation clouds
BUSINESSicon  06/07/2020 

Amid serious impacts of COVID-19, there are hopeful points for the aviation sector on the back of the EU-Vietnam Free Trade Agreement.

Trade kickstart with distinctive solutions
Trade kickstart with distinctive solutions
BUSINESSicon  06/07/2020 

Vietnam is boosting its diplomatic activities in hope of attracting more investment and expanding its trade in the global market, with many of the country’s major partners about to open their doors to the world again.

EuroCham proposes Gov’t to cut 50 per cent of registration fee for imported cars
EuroCham proposes Gov’t to cut 50 per cent of registration fee for imported cars
BUSINESSicon  06/07/2020 

The European Chamber of Commerce in Vietnam (EuroCham) proposed the Government to apply the 50 percent registration fee reduction to all automotive assembly firms, importers and dealers of new vehicles.

Shares to correct amid lack of positive news
Shares to correct amid lack of positive news
BUSINESSicon  06/07/2020 

The benchmark VN-Index on the Ho Ch Minh Stock Exchange (HoSE) gained 0.62 per cent to close Friday at 847.61 points.

P2P firms in Vietnam waiting for a sandbox
P2P firms in Vietnam waiting for a sandbox
BUSINESSicon  06/07/2020 

Peer-to-peer (P2P) lending companies expect that the sandbox for fintech would eliminate unscrupulous businesses and help the market grow significantly.

Business outlook gloomy for firms based in Old Quarter of Hanoi
Business outlook gloomy for firms based in Old Quarter of Hanoi
BUSINESSicon  06/07/2020 

Many business owners in Hanoi’s famous Old Quarter are becoming increasingly concerned about the decline in customers, causing their revenue to sharply decrease, and resulting in many stores closing their doors following COVID-19 epidemic.

Auto dealers deemed main beneficiaries of registration fee cut
Auto dealers deemed main beneficiaries of registration fee cut
BUSINESSicon  05/07/2020 

Auto dealers have proved to be the biggest beneficiaries of the Government's move to introduce a 50% cut in car registration fees, and not car buyers, as expected, 

Nine more expressway contractors suspected of construction violations
Nine more expressway contractors suspected of construction violations
BUSINESSicon  05/07/2020 

Nine more former contractors have been accused of irregularities in the construction of a 139-kilometer-long expressway whose severe deteriotion was reported shortly after its opening in central Vietnam.

VASEP decries taxes on semi-processed and processed seafood
VASEP decries taxes on semi-processed and processed seafood
BUSINESSicon  05/07/2020 

Tax agencies have slapped many firms with a corporate income tax on semi-processed seafood products at 20%, while their products for exports or domestic consumption that are mainly processed, 

Domestic property market faces uncertainty
Domestic property market faces uncertainty
BUSINESSicon  05/07/2020 

The domestic real estate market is hoped to have growth in the fourth quarter of this year and before the Lunar New Year 2021 if, by this year-end, the domestic economy is restored to levels from before the COVID-19 pandemic.

Hanoi moves towards approving construction of third Aeon Mall
Hanoi moves towards approving construction of third Aeon Mall
BUSINESSicon  05/07/2020 

The proposed construction of a parking lot and the Aeon Mall Hoang Mai Trade centre will soon be decided upon by the Hanoi People's Committee as Prime Minister Nguyen Xuan Phuc has approved the adjustment of the city's construction planning.

Pork and oil prices key to keeping inflation in VN under control: experts
Pork and oil prices key to keeping inflation in VN under control: experts
BUSINESSicon  05/07/2020 

With huge inflation pressure on the way in the remaining months of this year, a close watch must be kept on the prices of key products like oil and pork to hit the goal of keeping inflation below 4 per cent, experts have said.

EVFTA, plus Vietnam's COVID-19 success, to help attract more FDI: experts
EVFTA, plus Vietnam's COVID-19 success, to help attract more FDI: experts
BUSINESSicon  07/07/2020 

The country's great achievement of containing the spread of COVID-19, plus the EVFTA (EU-Vietnam Free Trade Agreement), will help Vietnam attract more FDI.

Prices of luxury cars from Europe will not go down immediately
Prices of luxury cars from Europe will not go down immediately
BUSINESSicon  06/07/2020 

The import tariff on European car imports will be decreasing gradually by 7 percent per annum. It will take at least five years to see considerable price decreases.

US firms create record 4.8 million jobs in June
US firms create record 4.8 million jobs in June
BUSINESSicon  03/07/2020 

The reopening of businesses has spurred job growth but a rise in Covid-19 cases may hamper recovery.

Chubb Life Vietnam honored “Best Companies to Work for in Asia 2020”
Chubb Life Vietnam honored “Best Companies to Work for in Asia 2020”
BUSINESSicon  03/07/2020 

Chubb Life Vietnam has been recognized as one of the “Best Companies to Work for in Asia 2020” by HR Asia, the continent’s leading publication for Human Resources professionals.

 
 
 
Leave your comment on an article

OR QUICK LOGIN