The potential impact of the Global Minimum Tax on enterprises in Vietnam: evidence from firm-level data
DOI:
https://doi.org/10.59394/JSM.139Keywords:
Global Minimum Tax (GMT), Foreign Direct Investment (FDI), Local Projections (LP), Generalized Method of Moments (GMM)Abstract
This paper provides firm-level, ex-ante estimates of the potential effects of the Global Minimum Tax (GMT) on enterprises in Vietnam using the Vietnam Enterprise Survey (2010 - 2023). Using system GMM for investment, feasible GLS for profits, and fixed-effects for revenues, we find that increases in effective tax burdens consistent with GMT are associated with statistically significant declines in FDI firms' fixed assets, profits, and short-term revenues, while domestic firms exhibit a short-lived investment expansion. Results are presented as predictive estimates based on historical relationships; we conduct multiple robustness checks (sectoral heterogeneity, alternative tax measures, placebo tests, IV specifications) to increase confidence in the findings. Policy implications are conditional on these ex-ante estimates and should be revisited as post-2024 firm-level data become available.
References
Auerbach, A. J. (1982). Taxation, corporate financial policy, and the cost of capital. NBER Working Paper No. 1026.
Beer, S., de Mooij, R. A., & Liu, L. (2018). International corporate tax avoidance: A review of the channels, magnitudes, and blind spots. IMF Working Paper, No. 18/168.
Borensztein, E., De Gregorio, J., & Lee, J.-W. (1998). How Does Foreign Direct Investment Affect Economic Growth? Journal of International Economics, 45, 115-135. Retrieved from https://doi.org/10.1016/S0022-1996(97)00033-0
De Mooij, R. A., & Ederveen, S. (2008). Corporate tax elasticities: A reader’s guide to empirical findings. Oxford Review of Economic Policy, 24(4), 680-697. Retrieved from https://doi.org/10.1093/oxrep/grn033
Devereux, M. P., & Griffith, R. (1998). Taxes and the location of production: Evidence from a panel of US multinationals. Journal of Public Economics, 68(3), 335-367. Retrieved from https://doi.org/10.1016/S0047-2727(98)00014-0
Devereux, M. P., & Griffith, R. (2003). Evaluating tax policy for location decisions. International Tax and Public Finance, 10(2), 107-126. Retrieved from https://doi.org/10.1023/A:1023364421914
Dunning, J. H. (1980). Toward an eclectic theory of international production: Some empirical tests. Journal of International Business Studies, 11(1), 9-31.
Dunning, J. (1981). International Production and the Multinational Enterprise. George Allen and Unwin, London.
Hall, R. E., & Jorgenson, D. W. (1967). Tax policy and investment behavior. American Economic Review, 57(3), 391-414. Retrieved from https://www.jstor.org/stable/1812110
Harberger, A. C. (1962). The incidence of the corporation income tax. Journal of Political Economy, 70(3), 215-240.
Hugger, F., González Cabral, A. C., Bucci, M., Gesualdo, M., & O’Reilly, P. (2023). The global minimum tax and the taxation of MNE profit (OECD Taxation Working Papers, No. 68). OECD Publishing. Retrieved from https://dx.doi.org/10.1787/9a815d6b-en
Javorcik, B.S. (2004). Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers through Backward Linkages. American Economic Review, 94, 605-627. Retrieved from http://dx.doi.org/10.1257/0002828041464605
Jordà, Ò., & Taylor, A. M. (2024). Impulse response analysis using local projections. American Economic Review, forthcoming.
Jorgenson, D. (1963). Capital Theory and Investment Behavior. American Economic Review, 53, 247-259.
Jusoh, S., & Ramli, I. M. (2024, October). Global Minimum Tax: Policy Impact on Investment Promotion and Incentives in ASEAN Member States (ERIA Policy Brief No. 2024-04). Jakarta: Economic Research Institute for ASEAN and East Asia (ERIA). ISSN: 2086-8154.
King, M. A., & Fullerton, D. (Eds.). (1984). The taxation of income from capital: A comparative study of the United States, the United Kingdom, Sweden, and Germany. University of Chicago Press for the National Bureau of Economic Research. Retrieved from http://www.nber.org/books/king84-1
Le, Q. H., Nguyen, T. H. T., Nguyen, X. H., Phung, T. U., Tran, T. H., Trinh, T. H. M., & Hoang, T. P. A. (2024). The impact of the Global Minimum Tax on Vietnam’s foreign direct investment attraction. Asia and the Global Economy, 4(2), 100090. Retrieved from https://doi.org/10.1016/j.aglobe.2024.100090
Liang, Y. (2024). The impact of the global minimum tax reform on China and its countermeasures. Economics, 18(1), 20220104. Retrieved from https://doi.org/10.1515/econ-2022-0104
Markusen, J.R. (1995). The Boundaries of Multinational Enterprises and the Theory of International Trade. Journal of Economic Perspectives, 9, 169-189. Retrieved from https://doi.org/10.1257/jep.9.2.169
Musgrave, R. A., & Musgrave, P. B. (1989). Public Finance in Theory and Practice. McGraw-Hill.
OECD. (2007). Tax effects on foreign direct investment: Recent evidence and policy analysis. OECD Publishing. Retrieved from https://doi.org/10.1787/9789264038387-en
OECD. (2010). Tax policy reform and economic growth. OECD Publishing. Retrieved from https://doi.org/10.1787/9789264091085-en
OECD (2021). Tax challenges arising from the digitalisation of the economy - pillar two model rules (Global anti-base erosion rules-globe). Paris: OECD Publishing.
Olea, J. L. M., Plagborg-Møller, M., Qian, E., & Wolf, C. K. (2025). Local projections or VARs? A primer for macroeconomists. In NBER Macroeconomics Annual 2025. National Bureau of Economic Research. Retrieved from https://www.nber.org/system/files/chapters/c15140/c15140.pdf
Plagborg-Møller, M., & Wolf, C. K. (2019). Local projections and VARs estimate the same impulse responses. In NBER Macroeconomics Annual 2019 (pp. xxx–xxx). National Bureau of Economic Research. Retrieved from https://doi.org/10.3386/w26684
Trang, V.T.H. (2025). The impact of implementing the Global Minimum Tax on economies and policy recommendations for Vietnam. In-depth Scientific Article, Vietnamese Banking Review (Electronic Edition), February 2025. Retrieved from https://tapchinganhang.gov.vn/tac-dong-cua-viec-trien-khai-thue-toi-thieu-toan-cau-den-kinh-te-cac-nuoc-tren-the-gioi-va-khuyen-nghi-cho-viet-nam-15573.html
UNCTAD, 2022. World Investment Report 2022, New York.
Wilson, J. D. (1999). Theories of tax competition. National Tax Journal, 52(2), 269-304.
