Tech titans in Vietnam office riddle

Since the Law on Cybersecurity was approved five months ago, Google and Facebook have still kept silent on the issue of opening representative offices or branches in Vietnam as required by the law, which will officially take effect on January 1, 2019.

Facebook and Google have 50 and 60 million Vietnamese users, respectively, generating the companies hundreds of millions of dollars in annual revenue, which makes it hard to imagine that the two corporations would be willing to give up the market, according to the Ministry of Public Security (MoPS).

Regarding their business activities in Vietnam, lawyer Lai Ngoc Thanh from Basico law firm told VIR, “The trend of shifting from traditional to online advertising, especially social networks, enables cross-border platforms to make great profit in Vietnam, which accounts for two-thirds of these companies’ budget.”

In fact, the two corporations are regularly running recruitment campaigns in the country, which shows their unbroken interest.

Accordingly, after its former representative in Vietnam Huynh Kim Tuoc left Facebook in late July 2018, the company immediately recruited Uber Vietnam’s former policy director Nguyen Anh Nguyet to be in charge of its public policy department.

In this past March, Facebook also recruited Le Diep Kiep Trang, former director of Fossil Vietnam, as director of Facebook Vietnam. Furthermore, since Trang’s appointment, the social network platform has announced recruiting Vietnamese personnel three times.

Similarly, via the independent organisation Google Developers Group (GDG), Google has held a large number of technology events in Vietnam.

It is apparent that Google and Facebook are especially interested in the Vietnamese market, which makes a potential decision to withdraw from the market highly unlikely.

AMPLE ADVANTAGES

Based on the MoPS’ view, the Law on Cybersecurity not only leaves businesses unaffected but will also facilitate their activities in Vietnam as data localisation would decrease costs, accelerate loading speed, and improve service quality.

Along with the benefits, the companies establishing branches or representative offices in Vietnam will be afforded all the rights and protection provided by the extensive legal framework of Vietnam, making available legal recourse to punish illegal online activities, such as false advertising, intellectual property infringement, and the divulgement of business secrets. In addition, tech businesses will receive similar treatment to other foreign enterprises in different sectors in terms of legal procedures, business registration, service licensing, inspection, taxation, and fair competition.

However, the law also stipulates that the companies have to establish branches or representative offices in Vietnam. Opening official branches in Vietnam means that the two giants’ operations will be under the Vietnamese authorities’ supervision and will have to comply with Vietnamese regulations, such as paying taxes for the Vietnamese government via domestic bank accounts.

Responding to concerns that the law will violate international treaties, Luong Tam Quang, head of the MoPS’ Office affirmed that the law is in full compliance with international practices. Accordingly, 18 nations across the globe have ordered foreign companies to store the personal information of users in their territories. These nations include Canada, Russia, Germany, China, Indonesia, Greece, Bulgaria, Denmark, Finland, Sweden, Turkey, Venezuela, Colombia, Argentine, and Brazil. This statement was confirmed by a member of local law firm VCI Legal.

“In the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Vietnam is currently in communications with Australia, Canada, Malaysia, New Zealand, and Japan (six out of the 11 other member states) affirming that the law’s provisions on data storage are not contrary to or violate the country’s commitments,” a VCI lawyer explained. “Some World Trade Organization member states have already enacted similar regulations, setting the precedent for Vietnam.”

Regarding tax collection from social network platforms as well as advertisers, individuals, and organisations earning from the platforms, Thanh from Basico also affirmed that the management and tax collection will be in line with international commitments. Vietnam is currently amending its legal framework to strengthen administration and supervision in the area.

Talking with VIR, Warrick Cleine, chairman and CEO of KPMG Vietnam and Cambodia, also highlighted the need for Vietnam to enter into co-operation with other countries to jointly deal with tax issues, creating one global taxation platform.

VIETNAM NOT ALONE IN NEED FOR REPRESENTATIVE OFFICES

According to Quang, before Vietnam, a large number of nations required Facebook and Google to open representative offices in their territories.

“Google and Facebook has about 70 and 80 representative offices, respectively, across the globe,” Quang said. “The setting up of legal entities by foreign enterprises in Vietnam will help create a fair and responsible business environment in Southeast Asia.”

However, despite having a large number of representative offices over the world, administrating the two corporations’ activities is a growing headache for countries at large. Over the past few years, the European Commission (EC) has been playing a cat-and-mouse game with Facebook and Google, trying to corner them into paying tax. The EC’s is currently planning to issue a new tax worth $5.0 billion per year on Facebook, Google, and Amazon.

According to the UK’s The Guardian, the growing dominance of digital companies is a long-term threat to Europe’s tax base, while also sparking questions of fairness. The EC estimates that digital businesses pay an effective average tax rate of only 9.5 per cent, compared with the 23.2 per cent for bricks-and-mortar companies.