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Finance ministry proposes to ease exemptions for other big

firms

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Immediate waivers to cut tax revenues by at least $425

million

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Investment-reliant Hanoi fears reputation impact from

global tax

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Global top-up tax of 15% is meant to reduce tax avoidance

By Francesco Guarascio and Khanh Vu

HANOI, Sept 12 (Reuters) - Vietnam plans to exempt coal

power plant operators from a global tax and wants to ease the

granting of waivers to other big firms, effectively forfeiting

hundreds of millions of dollars to reassure foreign investors, a

document seen by Reuters shows.

The Southeast Asian nation acts as an industrial hub for

multinationals, but U.S. 20% duties on its exports, higher taxes

on big companies and power supply problems have recently reduced

its appeal.

The proposal from the finance ministry, dated September 7

and still subject to changes, would "ensure a stable investment

environment", it says, by not applying to some multinationals

the worldwide minimum 15% tax. Under the system introduced by

the Organisation for Economic Co-operation and Development to

tackle tax avoidance, wherever local taxes are lower, a top-up

levy should be applied to meet that minimum.

Vietnam would grant an immediate exemption from that levy to

seven power plants controlled by foreign investors, including

Japan's Mitsubishi ( MSBHF ), Marubeni ( MARUF ) and Sumitomo ( SSUMF )

, South Korea's Kepco, U.S. energy firm AES ( AES )

, and state-owned China Southern Power Grid, the document

shows.

The companies may still be forced to pay the top-up tax in

other jurisdictions.

In the document the ministry said its proposal complied with

OECD guidelines.

Vietnam's finance ministry, the OECD and the companies

mentioned in this story, did not respond to requests for

comment.

The exemption would lower by about $426 million Vietnam's

tax revenues from six plants over roughly a two-decade period,

the document says, with possible additional losses from the

seventh plant which have not been estimated yet.

However, "applying the tax on the projects would expose the

Vietnamese government to the risk of having to pay compensation

that exceeds the tax revenues," the document said.

The proposed legislative changes, which the parliament could

approve next month, would primarily concern Kepco and Marubeni ( MARUF ),

the largest shareholders of the Nghi Son 2 power plant in

Northern Vietnam which alone would pay in Vietnam nearly $190

million in additional taxes by 2047, if not exempted from the

global levy there.

PROPOSAL PAVES WAY FOR MORE TAX WAIVERS

Under the proposal, the government will also be given ample

leeway to decide on more exemptions, prioritising the country's

"investment reputation" over tax collection.

If foreign investors "request to have their investment

incentives guaranteed, the government shall consider and address

the request in accordance with investment regulations," the

proposal said.

Vietnam wooed dozens of multinationals with generous tax

incentives, including South Korea's Samsung Electronics and U.S.

chipmaker Intel. Many of them complained that it was hard to

obtain compensations pledged by the government after the

approval of the new tax on multinationals.

Vietnam was among the first countries to apply last year the

global 15% top-up tax on multinationals, which it estimated

would raise $600 million a year, and set the deadline for tax

declarations at the end of this year.

The country's corporate tax rate is 20%, but Vietnam has for

years offered large foreign investors effective rates as low as

5% and extended tax vacations.