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FDI at bottom rung in state budget contribution despite record profit
Ngoc Thuy 09:45, 2018/02/07
Foreign direct investment (FDI) enterprises` contribution to the state budget remains modest, in spite of receiving preferential treatment, stated the General Statistics Office (GSO).
Remarkably, the FDI sector generated the largest portion of revenue with VND327 trillion (US$14.3 billion), while this number for the domestic sector remains modest at VND188 trillion (US$8.2 billion), said the Director of the Industrial Statistics Department, Nguyen Dinh Thuy, at the February 6 press conference announcing the enterprise development index.
 
FDI at bottom rung in state budget contribution despite record profit.
FDI at bottom rung in state budget contribution despite record profit.
However, the domestic sector contributed the most to the state budget with VND434 trillion (US$19.1 billion), while the FDI sector only contributed VND250 trillion (US$11 billion). 

Accordingly, the FDI sector generated large revenue but its contribution to the state budget was disproportionate, mainly due to a number of preferential policies offered for FDI enterprises. 

For example, with regard to corporate income tax, while domestic enterprises have to pay the maximum amount of 22%, the highest amount payable by FDI enterprises is only half of this. 

Besides, FDI enterprises are exempt from many tax lines, such as import tariffs for parts and accessories. 

Moreover, many provinces and cities also offer preferential policies to facilitate FDI attraction, such as the provision of free-of-charge services including startup and site clearance, while offering lower land rental rates. 

"The government will keep reviewing and supervising preferential treatment policies applied by provinces and cities for the FDI sector. Additionally, a part of the FDI sector has been conducting transfer pricing to evade tax, causing losses to the state funds and unfair competition," Thuy stressed.

As of December 31, 2017, the total number of operational enterprises was 561,064.

2017 also recorded an all-time record number of newly established enterprises with 126,859, in which the average registered chartered capital was reported at VND10.2 billion (US$447,000). 

It is estimated that around 26,448 enterprises resumed operations, a reduction of 0.9% compared to 2016. The number of enterprises temporarily suspending operations was 21,684, up 8.4%, and dissolved enterprises numbered 12,113. 

Despite investing a large amount of capital into the economy, the total net revenue from the business community in 2016 was recorded at VND17,400 trillion (US$763 billion), while the FDI sector accounted for VND9,760 trillion (US$428 billion).

The FDI sector, in spite of generating moderate levels of revenue, experienced the highest growth rate with VND4,800 trillion (US$210 billion). On the other hand, the domestic sector posted low revenue growth of VND2,880 trillion (US$126 billion), due to the ongoing process of equitization.

In particular, there were some 47% of enterprises running profit, according to the GSO report, mainly due to inefficient operations and low productivity. 
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