Could Trump’s US tax overhaul hit FDI inflow in Vietnam?

The U.S. House of Representatives gave its final approval to a sweeping, debt-financed tax bill at the end of 2017, representing the biggest overhaul of the U.S. tax code in more than 30 years. The changes include the country’s corporate income tax rate falling from 35 percent to 21 percent, as of January 1, 2018.  “We’ve become competitive all over the world. Our companies won’t be leaving our country any longer because our tax burden is so high,” CNBC quoted President Donald Trump as saying at a recent cabinet meeting. The president called it “above all else a jobs bill”, contending that changes to the business tax structure would encourage more companies to relocate their operations to the U.S. and hire more workers. But what Trump claims to be positive for the U.S. could have negative implications for its foreign partners. “The overhaul could have negative impacts on U.S. backed investment in Vietnam. U.S. businesses are likely to review their investment strategies in overseas markets, including Vietnam,” economist Nguyen Tri Hieu said. They could withdraw their profits from Vietnam to relocate their operations back home, instead of expanding their investments in Vietnam, he added. “This is a concern for our economy.” However, what is more worrying is that some countries could offer tax incentives to persuade U.S. companies to stay, local media quoted Vu Viet Ngoan, head of the economic advisory group for Vietnam’s Prime Minister Nguyen Xuan Phuc, as saying. This could affect Vietnam’s competitiveness in attracting foreign investors,… [Read full story]


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