Big tech suggests Vietnam rewrite its digital tax plans

Nice economy you’ve got there. It’d be a shame if growth slowed

Big Tech’s Asian lobby group, The Asia Internet Coalition, has issued a statement calling for Vietnam to consult on the impact of its proposed tax laws and then rewrite them.

In 2019, Vietnam passed new tax laws that required global digital businesses to pay tax on income made within the nation’s borders even if the business was conducted abroad, with a July 2022 start date. The nation has issued several circulars that explain exactly how the new scheme will work. A new draft circular released on March 2nd, 2021, offered more detail on how the law would be implemented.

The new draft also quickly generated objections, especially for language that could mean business transactions that are already taxed under other provisions are taxed again. A requirement for offshore businesses to register in Vietnam, or be registered as a virtual onshore entity for taxation purposes, has also raised eyebrows.

The aim of Vietnam’s laws is to tax digital services delivered from offshore and to prevent erosion of its local tax base.

But the Asia Internet Coalition (AIC), an industry association with members including Google, Yahoo!, Apple, Facebook, LinkedIn, SAP, Amazon, and Airbnb, has stuck to its usual argument that Vietnam would be better off waiting for global approaches to digital taxation are settled.

“Certain provisions in the Draft Circular are concerning and overly complex, which will likely result in onerous and unnecessary burdens throughout the value chain, including on Vietnamese customers,” coalition managing director Jeff Paine said in a statement [PDF].

“We urge the Ministry of Finance (MOF) and the General Department of Taxation (GDT) not to introduce tax measures that target the digital economy and to instead remain committed to the OECD-led multilateral negotiations for a consensus-based solution to the taxation of the digitalization of the global economy,” Paine said, suggesting instead “an international tax regime that supports Vietnamese businesses and the growth of the country’s economy.”

Vietnam’s economy has done exceptionally well in the last year, with the International Monetary Fund rating it as Asia’s fastest-growing nation “thanks to strong economic fundamentals, decisive containment measures and well-targeted government support”.

The AIC may be thinking longer-term with its suggestion, and its mention of value chains may also be significant as Vietnam aspires to grow its tech manufacturing industries.

The Coalition did not, however, mention that the OECD’s Base Erosion and Profit Shifting (BEPS) project is also complex and is inching along after planned 2020 meetings went virtual or were delayed by you-know-which-virus.

Nor has the Coalition pointed out that it opposed Indonesia creating its own digital services tax, yet its members have continued to pour money into the nation to ensure they have a stake in local e-commerce giants. ®