Sep 20, 2018 / 06:34

Vietnam FDI sector contributes meagerly to state budget despite robust revenue

The Hanoitimes - FDI sector`s return on asset (ROA) reached the highest among Vietnam`s economic groups in 2016 with 6.9%, followed by the state sector with 2.6% and the private sector with 1.4%.

In 2016, the FDI sector recorded the highest growth rate in revenue among Vietnam's economic sectors, at 134% compared to 2011, but contributed the least to the state budget, according to the General Statistics Office (GSO). 
Overview of the GSO's meeting. Source: Ngoc Thuy.
Overview of the GSO's meeting. Source: Ngoc Thuy.
FDI sector among the best performers

During the 2011 - 2016 period, the FDI sector's annual revenue averaged VND560.7 trillion (US$24.13 billion), up 18.6% compared to 2011. It was lower than the VND880.5 trillion (US$37.9 billion, up 12.3%) of the private sector recorded during the same period, informed the GSO in its latest report. 

The private sector came second in terms of revenue growth, up 78.8% in 2016 against the figure number posted in 2011, while accounting for the largest proportion of the total revenue, 55.9%. 

The state sector's revenue growth rate in 2016 was the lowest among the three economic groups in 2016, up 8.9% compared to 2011 and accounting for 16.7% of the total revenue. The average growth rate in revenue of the sector was 1.7% during the 2011 - 2016 period. 

Notably, the FDI sector's return on asset (ROA) reached the highest among others in 2016 with 6.9%, followed by the state sector with 2.6% and the private sector with 1.4%. 

Meanwhile, the private sector had the lowest return on sales (ROS), at 1.9%, in 2016, much lower than that of the FDI and state sectors, reaching 6.7% and 6.6%, respectively. 

Tax incentive as reason for FDI low contribution

It is, however, noteworthy that the private sector paid the largest proportion of tax, at 38.7% in 2016, higher than that of the state and FDI sectors, at 32.2% and 29.1%, respectively. 

Pham Dinh Thuy, the GSO's director of the Industrial Statistics Department, pointed to tax incentives as one of the main reasons for foreign invested companies (FIEs) paying the least amount of tax. The low contribution from FIEs is partly due to a number of preferential policies offered to attract FIEs into priority fields. 

With regard to corporate income tax (CIT), while domestic enterprises have to pay the maximum 22%, the highest amount payable by FIEs operating in high-tech fields is only half of this for the first 30 years, he said. "FIEs are also exempted from paying taxes in the first four years and then pay 50% for the next nine years. FIEs in the high-tech sector are also exempted from many tax lines, such as import tariffs for parts and accessories."

"This is one of Vietnam's most attractive factors for foreign investors and FIEs," Thuy added. 

Regarding this matter, Le Thi Duyen Hai, director of the Department for Tax Declaration and Accounting under the General Department of Taxation, said in addition to tax payment, state owned enterprises have to contribute a considerable amount in dividends and after-tax profit to the state budget, which amounted to VND67 trillion (US$2.88 billion) in 2017 and VND65 trillion (US$2.79 billion) in 2016. 

"This has a significant impact on the structure of state budget contribution from economic groups," Hai added.