Impacts of the global minimum tax on foreign direct investment in Vietnam and some policy recommendations

Abstract

This research focuses on analyzing and evaluating the detailed impacts of the Global Minimum Tax (GMT) on Foreign Direct Investment (FDI) flows in Vietnam. In this research, we identified a series of both positive and negative impacts of GMT on FDI. On the positive side, GMT has the potential to generate higher tax revenues, reduce tax optimization, create a more equitable and transparent business environment, encourage sustainable investment activities, and enhance the effectiveness of anti-tax evasion measures. However, the downside of GMT cannot be ignored. There's a risk that GMT might reduce Vietnam's competitive capacity in the global economic arena. Concurrently, this tax might also exert pressure that shifts capital out of Vietnam and intensifies illicit investment activities. To address and optimize these impacts, this article presents a series of policy solutions that the government and regulatory bodies in Vietnam can consider implementing. The primary objective is to maximize the benefits from GMT while minimizing any negative impacts it may impose. The findings from this study not only provide an in-depth understanding of GMT's impact on FDI in Vietnam but also lay the groundwork for further research, aiming for a more comprehensive assessment of GMT's influence.