VinaCapital has released an Economist’s Note Looking Ahead at 2024, in which the firm’s Chief Economist, Michael Kokalari, says the introduction of the global minimum tax should have limited impact on Vietnam’s FDI inflows.
His key points are
- Vietnam will find away to work around it and rebate some of the new tax collected; and
- That tax incentives are only a minor factor in choosing which emerging market to invest in.
Note: On the latter point, this may be true but the very-low tax rates that were on offer pre-GMT (sometimes as low as five percent) definitely helped. Also Koklari argues that in developed markets tax incentives play a bigger role because labour costs and infrastructure are comparable and by extension that in emerging markets they are not as important. However, infrastructure and labour costs are comparable in many emerging markets, particularly in Southeast Asia it’s just that they are comparable at a lower standard.
Also of note, VinaCapital is an investment management firm and this may indicate a vested interest in continued FDI in Vietnam.