Towards Tax Justice for Prosperous Viet Nam

Multinational Enterprises (MNEs) exploit gaps and mismatches between different countries' tax systems to avoid paying taxes, shifting their profits to low-tax jurisdictions. Numerous countries anticipate a significant increase in tax revenue once the Global Minimum Tax (GMT) is officially implemented, as the latter shall ensure that MNEs pay at least 15 % tax on their profits in each jurisdiction. For example, a German research institute estimates additional tax revenue in Germany of 4 billion EUR by 2026, while the Netherlands forecasts an annual additional tax revenue of 266 million EUR.

Under the “Strengthening Public Financial Management” project, co-funded by the EU and the German Government, the Ministry of Finance of Viet Nam and GIZ are collaborating to support the implementation of the GMT in Viet Nam to tackle tax avoidance practices. The GMT shall be officially effective from January 2024, ensuring that MNEs pay their fair share of tax.

However, at the same time, the question arises, how countries with traditionally lower effective tax rates, like Viet Nam, can inspire MNEs to continue investing within their borders, even in the wake of the GMT. As many (tax) incentives will not work anymore under the GMT, Viet Nam should revisit its (tax) incentives and ensure that they will attract investment in the future.

From 28 August to 1 September 2023, the delegation representatives from the Vietnamese Ministry of Finance, the National Assembly’s Committee for Financial-Budgetary Affairs, the Department of Justice, and the General Department of Taxation embarked on a peer learning mission to Germany to gather insights and discussions with representatives of the Federal Ministry of Finance (BMF), the Federal Ministry for Economic Cooperation and Development (BMZ), the Bavarian Ministry of Finance and Regional Identity, the Federation of German Industries (BDI), and different research institutes. The exchanges were focused on critical changes in legislation, organizational set-up and processes for the adoption of the GMT, methodologies for impact assessment, as well as measures to maintain Germany’s competitiveness after the effectiveness of the GMT globally.

The insightful lessons learnt from federal bodies to provincial administrations, as well as MNEs and research institutes will help the delegation representatives in drafting the legislation before submission for approval to the National Assembly.