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GSO: FDI enterprises earn highest profits, pay lowest taxes

Released at: 22:59, 16/02/2018

GSO: FDI enterprises earn highest profits, pay lowest taxes

Illustrative image (Source: misa.com.vn)

Foreign enterprises contributing much less to State budget than other sectors, according to GSO report.

by Quang Huy

Foreign direct investment (FDI) enterprises, which have enjoyed multiple tax incentives, pay the lowest State taxes despite reporting high profits, figures show.

Foreign enterprises recorded the highest profit growth among all sectors, generating VND327.4 trillion ($14.4 billion) in pre-tax profits in 2016, increasing by 17.3 per cent on average in the 2010-2016 period, according to the latest report from the General Statistics Office (GSO).

The figure accounted for 45.9 per cent of all profits earned by all businesses during 2016, but foreign enterprises paid the least tax, totaling just VND250.9 trillion ($11.1 billion).

“The FDI sector earns large profits, more than other economic sectors, including State-owned and private enterprises, but its contribution to the State budget is lower,” Director of the GSO’s Industrial Statistics Department, Mr. Pham Dinh Thuy, said.

Many are involved in industry and the high-tech sector, which enjoy many types of tax incentives, including those regarding corporate income.

He cited as examples Samsung Thai Nguyen and Samsung Bac Ninh, which are exempt from corporate income tax for the first four years of operations and then subject to 10 per cent for the following 27 years, or half the amount domestic companies pay.

High-tech FDI companies are also exempt from import taxes on raw materials, spare parts, and components, and many localities offer their own tax incentives to attract more FDI.

State-owned enterprises (SOEs), meanwhile, which comprise the largest number of companies and employees, recorded profit of VND197.4 trillion ($8.72 billion) in 2016, while contributing VND277.3 trillion ($12.25 billion) to the State budget, an increase of 10.4 per cent per year in the five-year period.

Meanwhile, non-State enterprises reported the lowest pre-tax profit in 2016, of VND188.1 trillion ($8.3 billion), but paid the highest taxes, of VND434.7 trillion ($19.2 billion), an increase of 17 per cent in the 2010-2016 period.

Some FDI businesses have abused legal loopholes in conducting transfer pricing and evading VAT, which reduced their tax obligations, Mr. Thuy said, adding that the government has asked the Ministry of Planning and Investment and the Ministry of Finance to review the law to help reign in transfer pricing and to review the tax policies of localities to ensure a fair business environment across all economic sectors.

National Assembly (NA) delegates noted last October that despite being offered many land and tax incentives, the contribution by the FDI sector to the economy remains limited. “Vietnam should review existing policies, slash overly generous incentives for foreign investors, and offer local private firms equal treatment,” delegate Mr. Pham Trong Nhan said.

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