International Conference on Business and Finance

Taxation, especially Corporate Income Tax, is an extremely important financial instrument, associated with the existence and development of firms and the state. In 2009, a new tax policy aimed at decreasing corporate income tax for domestic firms was launched in Vietnam, from 28% to 25%, setting equally to foreign firms. This paper is interested in evaluating if this affected firm’s investment rate and capital stock. We use a panel data of firm-level in Vietnam during the period 2005-2012 for analyzing the corporate tax cut policy in 2009. We present some main findings. First, the tax cut in 2009 raised capital stock and investment rate in domestic firms relative to foreign firms. Second, this tax cut was beneficial for firms in Manufacturing and Service sector and did not affect firms in Agriculture sector.
Investigation into corporate tax-investment-capital stock nexus in Vietnam is quite opaque with mostly qualitative or simple descriptive statistics papers. Our paper is expected to contribute to the literature with the precise model of program evaluation. We use panel data in firm level with treatment effect method applied in the tax rate cut in 2009 in Vietnam so that the findings would be more persuasive.