Vietnam fears effects of US tax bill on foreign investment

Tax reform passed by the US Congress at the end of last year may affect Vietnam’s economy as US investors are likely to send their investment back home, where the corporate income tax (CIT) rate has been slashed, Vietnamese economic experts have warned.The sweeping tax reforms, signed into law by President Donald Trump on December 22, include reductions in the CIT rate from 35 per cent to 21 per cent and a minimum of 10.5 per cent rate on any foreign profits US companies send home.The tax overhaul should encourage corporations to relocate or build new operations in the US instead of overseas, where the CIT rate is often lower.The US Government also hopes that US companies will repatriate their foreign cash piles given the attractive 10.5 per cent tax rate.Countries where US companies are doing business, including Vietnam, see those benefits as challenges for their respective economies, members of an economic advisory panel to Prime Minister Nguyen Xuan Phuc said in a recent report.“US companies will transfer profits generated from operations in Vietnam back home rather than keeping the money here for re-investment,” said Mr. Vu Viet Ngoan, Head of the panel. “Vietnam’s economy will be impacted if many US corporations follow this trend.”But the bigger concern comes from neighboring economies, not the US tax bill itself, Mr. Ngoan noted.Many countries, including China, have begun to offer new tax incentives to keep US investors, “a trend Vietnam should keep a close eye on,” he said.According to the advisory panel,… [Read full story]


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