The Organization for Economic Cooperation and Development told Vietnam last week that handouts to big firms to offset higher levies under a global overhaul of tax rules would be problematic
Under the new rules shepherded by the OECD, companies paying less than 15% in a low-tax jurisdiction will from January face a top-up levy either in that jurisdiction or in their home country.
Vietnam is a major manufacturing hub heavily reliant on foreign investment which it has been able to attract over the decades partly thanks to tax sweeteners, but also because of low labour costs, proximity to China, free trade deals and stable government. OECD senior tax official John Peterson declined to comment about the outcome of the meeting, citing confidentiality rules.
Vietnam's planned subsidies would be in the form of after-tax cash handouts or refundable tax credits, according to initial plans subject to changes, Reuters has reported.
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