The Ministry of Finance (MOF) said that games are products with big revenue and high profits compared with other products and services. Games attract customers of all classes and ages, especially youth.
Taxation will harm game industry
Tuan of VCCI affirmed that no country imposes a luxury tax on games, and if MOF levies tax on games, this will impact industrial development. Any policy related to taxation needs thorough consideration before a decision is made.
Meanwhile, Vietnamese game firms are facing an unhealthy competition with foreign game distributors in the home market.
Agreeing with Tuan, Le Xuan Hoa, deputy chair of Vinasa (Vietnam Software & IT services), said many game firms succeed, but they have decided to go abroad instead of doing business in the Vietnamese market. This is a problem for policymakers to think about.
According to Hoa, online games are a combination of high technologies, including software, digital content, hardware and new technologies. The development of online games will help boost the development of digital technology.
Online games are a digital business field and Vietnam has the opportunity to promote the development of high technology. Many countries consider games a key industry, while online game creators are viewed as artists.
“Unlicensed games and bad games that create a bad impact are still operating in Vietnam and they affect good licensed games. If the good games have to bear a luxury tax as well, the industry will shrink. If so, we will help bad games and pirated games, thus accidentally prompting Vietnamese game distributors to go abroad to enjoy preferences,” Hoa said.
He said that the government wants to offer investment incentives to boost the development of digital technology. The luxury tax, if imposed, will shrink the game industry, and this is not in line with the Party and State’s policies on developing high technology.
“Other countries not only don’t impose luxury tax on games, but also offer preferences to the sector. Therefore, imposing a luxury tax won’t be in line with international practice,” Hoa said.
Nguyen Xuan Cuong, chair of the E-sports Association, said that if imposing a luxury tax on online games, players will shift to use other foreign services.
If the country imposed a tax on games, the revenue from games in Vietnam won’t be $650 million, but will decrease and the competitiveness of the industry will be weaker.
Vietnam is doing well in controlling content, but it cannot control cross-border services. As such, the tax policy, if implemented, would widen the gap between legitimate businesses in Vietnam and pirated games.
Reasons cited by MOF
One of the reasons MOF cited to explain its attempt to impose luxury tax on games is the high profit of the industry.
However, Cuong denied this, saying that the average profit is just 3-8 percent. The figures about revenue and profits of 10 leading firms can show this.
“There are many administrative procedures and licenses to be observed to distribute games in Vietnam. We still don’t have effective measures to control cross-border services,” Cuong said. “We strongly recommend not adding online games to the list of services subject to luxury tax."
A representative of the Hanoi University of Science and Technology, commenting on the disparity in tax between domestic and foreign games, said: "We can see that Nguyen Ha Dong had to shut down his games."
Nguyen Thuy Dung from Soha Game noted that MOF will fail to change users’ behavior when imposing that kind of tax. In order to do this, it needs to target what impacts the behaviors, but the policy cannot do this.
Talking about the ‘health’ of online game firms, Dung said in 2022, at least 10 game firms went bankrupt, while top 10 game firms in Vietnam had to downsize their staff.
Therefore, MOF’s conclusion that online games bring large revenue and profits is unreasonable.
Duong The Luong, deputy general director of VTC, affirmed that the revenue and profit of game firms are not high. Many first-generation game firms were established, but only VTC and VNG still exist and there are only about 20 operational firms.
The goal of imposing luxury tax to restrict players is not feasible as foreign games account for 80 percent of revenue in Vietnam.
La Xuan Thang of VNG, the biggest game firm in Vietnam, which has been operating for 18 years, said this is the first time the firm is consulted about policies for the game industry.