Tech parks urge greater tax cuts, in search of FDI

The nation’s hi-tech parks have argued that a proposed tax reduction for IT workers alone will not draw FDI

The proposal came from Danang Hi-Tech Park (DHTP) in the south-central city of Danang, Saigon Hi-Tech Park (SHTP) in Ho Chi Minh City, and Hoa Lac Hi-Tech Park (HHTP) in Hanoi. The proposal is viewed as an addition to the Ministry of Finance’s (MoF) recent proposal on a 50 per cent cut in personal income tax (PIT) for information technology (IT) workers from January 1, 2017 to December 31, 2020.

Doan Ngoc Hung Anh, deputy chairman of the DHTP Management Board, told VIR that “IT is part of the hi-tech sector, which also covers electronics, nano technology, telecommunications, and more. They should all be subject to the PIT reduction, not just IT workers.”

Echoing Hung Anh’s view, Le Bich Loan, deputy chairwoman of the SHTP Management Board, said that “It’s unreasonable that while workers in economic zones enjoy such a PIT reduction, those in hi-tech, which requires great intelligence and creativity, do not.”

As planned, the MoF’s proposal, which is part of the government’s resolution on tax incentives to support business development until 2020, will be discussed at the National Assembly this month.

Currently, labourers in the hi-tech sector are subject to various PIT levels of 5-35 per cent, depending on their tax bracket. PIT cuts are one of the special incentives that HHTP and DHTP are working on to become more attractive to investors. Their foreign direct investment (FDI) attraction has been lower than expected over the past years.

“We are proposing a 50 per cent cut in PIT in a draft decree on special incentives for HHTP, which is expected to be issued by the end of this year,” said an HHTP official.

As part of the same proposal, the DHTP Management Board is also suggesting higher incentives for certain investment activities, such as technical infrastructure development and other investment incentives, including preferential land rentals and PIT.

At present, hi-tech workers do not enjoy any incentives on PIT, which is a big concern among investors. They have faced challenges in recruiting qualified workers, hindering their business expansions.

Hoang Nam Tien, chairman of FPT Software (FSoft) in HHTP, said that FSoft is the first and largest software firm in HHTP. Currently, it is employing more than 2,000 programmers here.

“As we are developing the second and third phase of our project here, we really need special incentives on PIT and housing fees to retain and attract more talented people to serve the expansion,” Tien said.

According to Hung Anh, since his park finished development of infrastructure in late 2014, it has attracted four projects, including two foreign-invested ones registered at $140 million. The figure remains low compared to that of others.

Meanwhile, HHTP has to date attracted 73 projects, with the total registered investment capital of over VND55.4 trillion ($2.54 billion). Viettel, FPT Software, and Nissan are among the big brand names there.