The Effectiveness of Corporate Tax Incentives in Attracting Foreign Direct Investment: The case of Vietnam

Foreign investment plays an increasingly important role in the socio-economic development of developing countries including Vietnam. In order to attract foreign investment, Vietnam has issued many incentives to enhance the attractiveness of the investment environment, in which tax policies, especially corporate income tax policies are always paid attention and commonly used. By using qualitative research method, author evaluates the process of adjusting and implementing corporate income tax policies in Vietnam to attract foreign investment and compare the correlation with other countries in ASEAN. Research results show that Vietnam's corporate income tax policy has been significantly improved, the current corporate income tax rate is 20%, down nearly 38.5% since 1990. Compared to ASEAN countries, Vietnam's corporate income tax incentives policies are quite similar, which has helped improve Vietnam's comparative advantage in attracting investment, contributing to actively mobilizing FDI capital into Vietnam during this time. However, Vietnam 's corporate income tax incentives policies are mainly made for reducing tax rates, applying tax exemption time which created loopholes for FDI enterprises to avoid and evade taxes illegal.