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Tax incentives do not really have a significant impact on attracting FDI

• Under an agreement (come into force from 2024), between 136 countries and territories (including Vietnam) and the Organization for Economic Cooperation and Development (OECD) on a minimum tax on income businesses in most countries of the world (1) Countries, where the products and services of large multinationals are used, may tax the profits earned, even if these companies have no headquarter/office in that country and (2) Apply a minimum global corporate income tax (CIT) rate of 15% on the foreign income of the companies.
• Compared to the OECD minimum tax rate, the preferential tax rate in the first 10 years of investment in Vietnam will be 7.7% or 4.8% lower, depending on the performance of the FDI enterprise in the year of operation. Firstly. This leads to opinions that Vietnam will lose its competitive advantage when attracting FDI.
• According to our research, (1) Growth and expansion of the market, thereby increasing the value of benefits for shareholders is the top priority of the company, (2) Stable economic and political environment, clear legal framework and simple administrative procedures are the top priority factors in choosing an investment destination, (3) tax incentives will be put on the list andnegotiating table to make the final decision when there is more than one potential location to maximize the project investment efficiency. Thus, tax incentives are not the most important factor affecting the choice of investment destination.
• Finally, tax incentives are a tool to create competition among developing countries to attract FDI as a growth engine. However, this competition in the ASEAN region does not make a difference in tax rates after applying relatively preferential policies and the distribution of FDI flows to countries in the region has not changed much over the years.