Samsung, Intel, Bosch and more are protesting Vietnam’s tax on multinational corporations
The large foreign companies active in Vietnam, starting with Samsung, want to mitigate the impact of the new OECD tax on multinationals. They might have achieved something. All the details
Samsung, LG, Intel and Bosch are lobbying the government of Vietnam to introduce compensation for large foreign companies active in the country which, starting next year, with the entry into force of the new tax rules, will find themselves paying more taxes.
THE OECD TAX REFORM
From next January, in fact, a minimum rate of 15 percent will be introduced in Vietnam for large foreign companies as part of a broader, international tax reform promoted by the OECD, the Organization for Cooperation and Development economic. Hanoi has made it known that it will align itself with the OECD and, in fact, will raise the tax rate to 15 percent for most of the foreign companies present in its territory and currently subject to a very convenient tax regime.
The OECD reform stipulates that companies that pay low taxes abroad must be subjected to additional levies (top-up levy ) in their home countries. To pay the additional tax at home these companies may decide to withdraw foreign currency in Vietnam; to avoid being penalized, the Hanoi government intends to apply a tax rate of 15 percent.
VIETNAM NEEDS FOREIGN INVESTMENT
But Vietnam needs foreign capital to support its booming economy, and fears that OECD regulation could affect its attractiveness to multinationals. The country can count on a skilled workforce and lower costs than Europe or the United States, and is therefore considered by companies as an alternative to China for the installation of manufacturing capacity.
THE CONCERN OF SOUTH KOREAN COMPANIES (AND NOT ONLY)
The foreign companies most concerned about the tax policy review appear to be South Korean companies, such as Samsung and LG. Hong Sun, president of the South Korean chamber of commerce in Vietnam, said that if the tax issue is not resolved, "[the country's ] competitiveness will weaken".
In total, "half a dozen" companies have met with government officials to ask for compensation, Reuters wrote: in addition to the two South Korean companies, there are also the US Intel (semiconductors) and the German Bosch (appliances, automotive components , semiconductors).
COMPENSATION COMING SOON?
The agency adds that Vietnam, under pressure, is preparing a resolution – the parliament could approve it in October – which offers partial compensation to large companies, but the details of the measure are not known. It is possible that those companies that have made large investments in the country receive after-tax financing or refundable tax credits to support production or research expenses.
Samsung, LG, Intel and Bosch have invested tens of billions of dollars in Vietnam and employ many people. Samsung, for example, is the country's top foreign investor, where it employs 160,000 people and produces half of its smartphones. The Seoul company alone is worth nearly a fifth of Vietnam's total exports, and in 2019 its tax rate (which varies by province) was between 5.1 and 6.2 percent.
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The measure has an estimated cost of hundreds of millions of dollars a year, which should be roughly matched by the additional revenue guaranteed by the tax increase. It is possible that even the smallest companies, those not affected by the OECD tax reform, could receive the funding.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/vietnam-tassa-multinazionali-samsung/ on Tue, 30 May 2023 14:06:53 +0000.