Mr. Warrick Cleine, Chairman & CEO of KPMG in Vietnam and Cambodia, touched on specific issues for internal APEC trade and what lies ahead for both the bloc and Vietnam.

■ How do you view the development of internal APEC trade over the last few years? Have such developments met the bloc’s potential?

APEC’s role in facilitating regional integration has proven essential in promoting trade and economic growth in the Asia-Pacific region. For example, reducing trade barriers between members, harmonizing standards and regulations, and streamlining customs procedures have enabled goods to move more easily across borders. 

Significant achievements are reflected in many different angles. For example, intra-regional trade increased over seven-fold and reached $20 trillion in 2015; outpacing the rest of the world. 

Average tariffs fell from 17 per cent in 1989 to 5.6 per cent in 2014. The number of tariff lines enjoying zero per cent APEC tariffs increased from 27.3 per cent in 1996 to 45.4 per cent in 2014. 

Above all, APEC has created effective networks for communication among officials, researchers, and business, which has built significant mutual trust and mutual respect. 

The APEC Business Travel Card is a simple but powerful APEC initiative that facilitates the movement of business travelers across APEC countries, including into and out of Vietnam.

APEC still has immense growth opportunities, along with many challenges. For instance, infrastructure gaps in some parts of the region and some member countries are in the order of trillions of dollars. 

Funding these projects requires commitment and cooperation between governments, development banks, and the private sector. In addition, reviewing existing domestic policies on the protection of (sensitive) products will also help boost the trade liberalization process.

■ How has internal APEC trade development added value to the bloc’s growth and job creation in recent years?

As one of the most dynamic regions in the world in terms of demographics and trade activities, APEC has contributed to the region’s prosperity and poverty reduction, creating more jobs for the people.

One of the critical elements of APEC’s agenda is promoting regional economic integration through regulator capacity building activities, especially for small and medium-sized enterprises (SMEs), which account for the large part of member economies. 

These activities enable business, academia, and government leaders to improve their competitiveness through upgrading skills and knowledge to better support trade and investment. 

In addition to supporting small businesses, inclusive growth is another strategic objective of APEC, to ensure improvements in education outcomes and workforce participation rates in all members, including vulnerable rural and urban communities. 

Great progress has been made in supporting women’s participation in the growing economy and improving livelihoods and incomes for their families. 

The Trump administration creates further challenges for APEC member economies, as he has a stated “America First” approach to trade, which may conflict with the objectives of economic integration. 

This is especially challenging for export-driven economies such as Vietnam. This makes Vietnam’s participation in APEC even more important, as all of the members need to remain committed to a reform and integration program in order to lock in the gains that have been made so far.

■ Taxation reform within APEC members is said to spur growth. Do you think APEC members have done a good job in taxation reform over the years? 

Based on the APEC Tourism Working Group (TWG) project in 2011-2012 on Business Growth Opportunities in the New APEC Economy, taxation was clearly cited as one of the impediments in maximizing the full growth potential of tourism to raise more revenue and jobs in the region. 

According to the UN World Tourism Organization (UNWTO), the World Travel & Tourism Committee (WTTC), and the UN Conference on Trade and Development (UNCTAD), the competitiveness of destinations at the inter-regional level and international investment are influenced by taxation policies. 

In order to build a conducive and transparent environment, APEC member countries have already signed a multilateral convention for reviewing over 2,000 bilateral treaties and mismatched tax practices, and fast-tracking modifications to ensure good governance and sound policy decision-making practices are observed in introducing tax measures. 

APEC also created platforms whereby countries exchange best practices and guidance on the drafting of tax laws, regulations, and penalties for confronting key international taxation challenges to ensure more countries comply with a number of governance obligations and improve corporate policies, procedures, and outcomes.

Another example is the adoption and implementation of Base Erosion Profit Shifting (BEPS) in APEC economies. 

All APEC members are aware of the significance of BEPS and its implications to fairness and effectiveness of international tax systems and governments around the globe. Driven by global tax reforms in BEPS actions recommended by the OECD, Vietnam is among many APEC countries re-writing its transfer pricing laws. 

The newly-created Platform for Cooperation on Tax, with the combined expertise of the OECD, the International Monetary Fund (IMF), the World Bank Group, and the UN, includes a series of practically-focused toolkits to address the top-priority BEPS-related issues facing developing countries. 

This platform is one among many APEC initiatives in providing a coherent approach on domestic and international tax issues across APEC economies.

■ What should APEC members do to further reform their taxation system so it boosts trade and adds value in economic growth and job creation?

APEC member countries must commit to tackling tax avoidance and evasion in the region. This requires tax administrators not only strengthening the integrity of their tax systems but also enhancing communication and the exchange of information with other countries in both breadth and depth. 

Adopting internationally-agreed tax transparency standards and signing relevant instruments will help address cross-border tax issues more effectively. 

■ For Vietnam, what are the challenges in its taxation system as they relate to economic growth, boosting trade, and creating more jobs?

Market-oriented reform of tax policy and administration is vital for Vietnam to integrate into the global economy. 

First of all, there has been a shift in composition of revenue, from large State-owned enterprises (SOEs) and foreign-invested enterprises to myriad SMEs. 

This transition is also leading to an equally important change from cross-border trade-related taxes and revenue collection from crude oil towards a greater share of domestic tax revenue, for instance taxation of business profits, personal income, and capital gains on land. 

This reform goes beyond tax collection and administration procedures and will involve changes to the tax regulations themselves. 

Tax policy should encourage an efficient allocation of resources, to increase efficiency, transparency, and equity, while still ensuring the achievement of State budget revenue targets and other tax administration reform targets.

Vietnam’s tax reform must also enforce the implementation of internationally-agreed standards in transparency and the exchange of information in the tax area, as committed to when Vietnam joined the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and the Global Forum on Transparency and Exchange of Information for Tax Purposes. 

Vietnam has added challenges in the tax administration area, where reforms continue to be needed to ensure taxpayer protection, the ability to appeal decisions with competent and independent authorities, and taxpayer consultation when tax reforms are being considered.

VN Economic Times