FDI enterprises pay lowest taxes despite high profits

Update: February, 08/2018 - 15:25
FDI enterprises have achieved the highest profit growth among the economic sectors but pay the lowest taxes. — VNA/VNS Photo Danh Lam
Viet Nam News

HÀ NỘI – Foreign direct investment (FDI) enterprises, which have enjoyed multiple tax incentives, pay the lowest State taxes despite reporting high profits, statistics show.

FDI enterprises have achieved the highest profit growth among the economic sectors, generating VNĐ327.4 trillion (US$14.4 billion) in pre-tax profits in 2016, an increase of 17.3 per cent on average in the 2010-16 period, according to the latest report by the General Statistics Office (GSO).

This amount accounted for 45.9 per cent of the total profits earned by businesses across all sectors in 2016. However, they paid the lowest taxes to the State budget, amounting to only VNĐ250.9 trillion in 2016.

State-owned enterprises, comprising the largest number of companies and employees, earned VNĐ197.4 trillion in 2016, amounting to 27.7 per cent of profits earned by all businesses, marking a 9.4 per cent rise per year from 2010 to 2016.

The State-owned sector contributed VNĐ277.3 trillion to the State budget in 2016, an increase of 10.4 per cent per year in the five years leading up to 2016.

Meanwhile, non-State enterprises reported the lowest pre-tax profits of VNĐ188.1 trillion in 2016 but paid the highest taxes to the State budget, at VNĐ434.7 trillion, an increase of 17 per cent in the 2010-16 period.

"The FDI sector earns a large profit, more than the other economic sectors, including State-owned and private enterprises, but its contribution to the State budget is lower," said Phạm Đình Thúy, director of the GSO’s Industrial Statistics Department.

Thúy said FDI businesses were involved in industry and the hi-tech sector, which enjoyed many types of tax incentives, including those regarding corporate income.

He cited examples of Samsung Thái Nguyên and Samsung Bắc Ninh, which are exempt from corporate income tax for the first four years of operation and must pay some 10 per cent in corporate income tax in the following 27 years, half the amount domestic companies must pay.

Meanwhile, hi-tech FDI companies are exempt from import taxes on raw materials, spare parts and components.

In addition, many localities have implemented their own tax incentives to attract more FDI enterprises.

Some FDI businesses have abused the legal loopholes for transfer pricing, evading VAT, which reduced their payable tax obligations.

Thúy said the government has asked the Ministry of Planning and Investment and Ministry of Finance to review the law to help reign in transfer pricing by foreign enterprises, as well as check the tax policies of the localities to ensure a fair business environment across all economic sectors. – VNS