USING DIFFERENCE-IN-DIFFERENCE METHOD TO ANALYZE THE IMPACT OF CORPORATE INCOME TAX ON BUSINESS INVESTMENT IN VIETNAM

Abstract

The article aims to study the impact of the corporate income tax policy change in Vietnam on business investment by using the Difference in Difference (DID) method. In 2009, the corporate income tax created conditions for domestic businesses to receive a 3% tax reduction while foreign businesses did not change. Under the policy analysis, the article shows that the treated businesses have an increase in investment in the year of policy implementation, this impact also spreads to the following year but at a gradually decreasing level. Tax policy has a stronger impact on small businesses, which have financial constraint and loan difficulties than large businesses. The results also show that tax policy has the strongest impact on businesses in the service sector rather than other sectors. The results from the impact of the tax policy in 2009 bring implications for current tax policy in Vietnam.