Containers of goods at a port in Bangkok, Thailand (Photo: AFP/VNA)
Hanoi (VNA) – The Vietnam Institute for Economic and Policy Research (VEPR), in coordination with Oxfam, Prakarsa, Tax and Fiscal Justice Asia (TAFJA) and Vietnam Tax Justice Alliance (VATJ), on June 25 announced research outcomes on the case of corporate tax incentives in the ASEAN towards sustainable tax policies in the ASEAN Region.
The research found that ASEAN member countrieshave recorded high and stable economic growth for many decades, but their revenuecollection levels as a ratio to GDP remain very low in comparison to otherregions. In 2018, the ASEAN average was 19.1 percent of GDP which is lessthan half of that of the Organization for Economic Cooperation andDevelopment (OECD) countries. It is also lower than the average ofLatin America and the Caribbean.
One ofthe reasons for this is the generous corporate tax incentives offered toinvestors that have eroded the domestic revenue base, according to the research.
Pham Van Long from the VEPR said if ASEANmember countries continue to use tax incentive as a tool to compete and attractFDI capital, it will drain revenues and affect investment in improving publicservices such as health care, education, infrastructure and governance.
He added that there is no evidence that taxincentives help increase the FDI inflows into ASEAN, and such incentives have evencreated an unfair playground for small and medium-sized enterprises.
The research said ASEAN member countries are engaged in arace to the bottom by offering huge incentives for investors. Over the pastdecade, the average corporate income tax rate in the region has dropped from25.1 percent in 2010 to 21.7 percent in 2020.
“These tax incentives have helpedbig corporations to prosper at the expense of Asian people. This must cometo an end. ASEAN must blacklist - draw a line - and say no to harmful taxincentives which drastically deplete much needed national revenues. If anyincentives are to be allowed, they must only be meaningful investmentsthat benefit the people, with no exceptions,” said Dr. Nguyen Duc Thanh,Chief Advisor at the VEPR.
Ah Maftuchan, Co-coordinator of Tax and FiscalJustice Asia (TAFJA) urged ASEANmember states to collaborate and discard “beggar-thy-neighbor” taxpolicies, including “race-to-the-bottom” tax incentives that translateinto lost revenues which have left poorer countries and people struggling tomake ends meet.
Thereport makes three recommendations help the region increase nationalrevenues. First, the ASEAN needs a whitelist and blacklist of tax incentivesclarifying incentives that benefit equitable economic growth and that hindersuch. Secondly, the ASEAN needsto agree on a common minimum tax standard to stop the race to the bottom. Finally, the ASEAN needs to agree on rules for the goodgovernance of tax incentives./.
