Finance ministry opposes high incentives for special economic zones

Van Don special economic zone in the northern province of Quang Ninh. - Photo qtv.vn

These mechanisms are stated in the recently-issued Draft Law on Special Administrative Economic Units. The Ministry of Planning and Investment (MPI) has prepared the law for submission to the Government and the National Assembly.

Under the draft law, the MPI proposes many preferential policies on land and taxes to enhance the ability to attract investment capital, especially foreign-invested capital, in three special administrative -- economic units of Van Don in the northern province of Quang Ninh, Bac Van Phong in the southern province of Khanh Hoa and Phu Quoc in the southern province of Kien Giang.

The MoF has objected to the draft’s Clause 3 of Article 16, which proposes regulations allowing domestic economic organisations and foreign-invested economic organisations to mortgage their assets attached to land at foreign credit institutions and be entitled to the transfer of land use right directly from an organisation or individual having land use right to implement an investment project as a domestic economic organisation.

The ministry proposed that the MPI remove this incentive as mortgaged assets will be recovered by the credit institution and sold to recover the debt if the borrower cannot pay the debt. Thus, by allowing economic organisations to have land use right to mortgage the loan, then if they go bankrupt, the credit institution will not be able to handle mortgaged assets.

The draft also stipulates a 10 per cent preferential reduction of land use fees for foreign invested enterprises and Vietnamese residing overseas that are allocated land to implement investment projects for construction of residential housing for purposes of sale or for sale and lease.

However, the MoF proposed that the MPI re-consider this as the reduction of 10 per cent of the land use fee only benefits the buyers, so this policy will have little impact on production and business activities.

The MoF is also opposed to the MPI’s proposal to set up state funds outside the budget in the special economic zones, such as the Development Investment Fund and the Investment, Trade and Tourism Promotion Fund. The ministry explained the objection by quoting the Prime Minister as saying the funds should only be set up when necessary.

MoF disagrees with the idea of allowing overspending in revenue of the special economic zone as only budgets at central and provincial levels are permitted to overspend.

The ministry said the MPI should keep the special consumption tax imposed on casino and betting games at 35 and 30 per cent, instead of decreasing them to 25 per cent and 21 per cent under the proposal, adding that this is an indirect tax on types of goods and services which should limit consumption.