Vietnamese technology firms, which are inferior to foreign giants in terms of finance capability and experience, have to offer salaries doubt those offered by US tech giants to attract personnel of the same quality.
Babyme, for example, is a technology startup founded by Trinh Tuan, a renowned programmer. It is a 100 percent Vietnamese owned and established, hires Vietnamese workers and makes products for consumption in Vietnam.
However, the business is headquartered in Singapore.
“The current regulations force me to set up the company’s head office in Singapore. The business in Vietnam acts as the outsourcing company. As such, a Vietnamese business has to pay tax to a foreign company,” Tuan said.
Babyme’s story could be the story of many Vietnamese technology startups.
Deputy Prime Minister Vu Duc Dam, who heard the story at a meeting with technology startups held recently, noted that there were businesses that ‘eat Vietnamese rice but pay tax to foreign countries’.
Ironically, ‘eating Vietnamese rice but paying tax to foreign countries’ is what many technology firms providing inter-border services in Vietnam are doing. Google, Facebook, Uber and Apple are examples.
In Vietnam, Google and Facebook hold large online advertising market share. Meanwhile, Apple is second to Samsung in terms of mobile phones. While taking pride in their large online ad market share in Vietnam, both Google and Facebook have ‘forgotten’ their tax obligations.
Google employs workers from Vietnam, but its office is in Singapore, and because of this, it does not have to pay any dong in corporate income tax, personal income tax and social insurance premiums for workers.
With many years’ experience, the multinational giants can easily exploit the legal loopholes to avoid tax. Of course, the giants can pay more to their employers because they don’t have to pay tax.
According to the director of a Vietnamese technology firm, with the current personal income tax rate of 35 percent, technology firms will have to pay $3,000 a month so that a worker can receive $2,000.
If a Vietnamese technology firm wants its workers to receive the same salaries as Google’s or Facebook’s workers, they will have to pay twice as much as Google and Facebook.
While Vietnamese technology firms are smaller and less financially capable than foreign ones, they have to pay more to maintain their operation. This has not only caused loss of revenue to the state budget, but also a Vietnamese brain drain to foreign companies.
Meanwhile, as Nguyen The Tan, CEO of VCCorp, commented, personal income is the key to technology firms’ competitiveness, because personnel are the most valuable asset of companies.
Source: vietnamnet.vn