Taxation and Custom Reforms: A Burning Issue

The dialogue between the Ministry of Finance and enterprises concerning taxation and customs services, which was jointly held by the Vietnam Chamber of Commerce and Industry (VCCI) and the Ministry of Finance in Hanoi on July 26, helped enterprises settle their urgent issues. The hottest issue related to tax codes, taxable value, judicial customs procedures and the skills and attitudes of officials of taxation and customs services.

Deputy Minister of Finance Truong Chi Trung affirmed that the Ministry was determined to promote administrative reform to reduce unnecessary and overlapping procedures, which have wasted the time and money of enterprises. These include registration procedures for tax codes and their application between taxation and customs agencies. Instead of registering tax codes with two agencies, enterprises can now register with just the one. As a result, it will take enterprises eight days instead of 15 days to complete the procedures. The deputy minister of finance said that up to 50 per cent of customs documents had been removed while examination had been exempted for 57.1 per cent of exports and 16.9 per cent for imports. The proportion of random examination stands at 28.4 per cent for exports and 50.4 per cent for imports.

The report by Deputy Minister Trung shows positive measures in value added tax, corporate income tax and agricultural land use tax. The Ministry of Finance has removed 343 kinds of fees nationwide following its review of the issuance and implementation of the tax ordinance. The ministry has also agreed on the reduction of other fees, offering tax incentives to encourage investment in many fields, including scientific and technological research and development, and education and training development. The ministry has piloted online customs declarations, developed a database of fees and launched a website for enterprises to access information regarding tax and customs procedures. More than 60 per cent of questions sent by enterprises to the online dialogue were answered and enterprises' obstacles will continue to be settled.

The Head of the General Customs Department Le Manh Hung affirmed that Vietnam would continue to promote its administrative reform in the taxation service to facilitate enterprises' investment, export and import activities. The customs service will continue to perfect its system of legal documents, creating a legal framework for administrative reform, renewing management and awareness of responsibility, and promoting information technology. The service will cooperate with authorised agencies, such as the General Department of Taxation and the State Treasury, to simplify tax-related procedures. Hung said that shortcomings in the service, including the calculation of tax rates, judicial customs procedures, the skills and attitudes of officials, and the taxation and customs services, would be overcome shortly.

Head of the General Department of Taxation Nguyen Van Ninh said that early this year Vietnam began to implement three new (amended) tax laws, including the Law on Value Added Tax, the Law on Corporate Income Tax and the Law on Special Consumption Tax. Basically, these tax laws have been enforced and have produced their desired results. However, during the implementation of these laws, further obstacles have arisen. Before the dialogue, the Ministry of Finance and the General Department of Taxation had issued documents to provide guidelines for and settle 124 petitions of business establishments. The obstacles, which have been settled and continue to be settled, relate to the corporate income preferential tax rate for enterprises in export processing zones, industrial parks and high-tech parks. The government will resume the implementation of the preferential tax rate as before January 1, 2004. Concerning the value added tax of export processing enterprises, nine services (insurance, banking, post and telecommunication, consultancy, accounting, auditing, transportation, turn-around, office and warehouse leasing), will see the levying of value added tax to help reduce prices and increase competitiveness of their activities.      

However, the dialogue shows that many enterprises have yet to receive information about tax policies and laws. The puplicisation of policies on tax and customs services should therefore be promoted in the future, said Deputy Minister Trung. According to him, the key features in the dialogue include the implementation of the online customs declaration and the establishment of an effective customs declaration service in 2005.

During the dialogue, VCCI vice chairwoman Nguyen Thi Thuy and VCCI Pham Gia Tuc said that VCCI was always ready to provide support for enterprises and cooperate with relevant agencies to help enterprises overcome obstacles, contributing to creating a transparent and convenient legal environment for enterprises during international integration.

Forum:

At the discussion, representatives from many enterprises talked about pressing issues and expressed their wish that authorised agencies would help them to settle problems relating to their enterprises. Following are some ideas of the solutions proposed by enterprises:

Nguyen Van An - Director of the Thai Hoa Coffee Company

He expressed his great concern about the drawback in value added tax. He said that the State has owed his company VND10 billion (US$636,942) in tax refunds since 2002. 

He said, "coffee is a major export item with 90 per cent of Vietnam's coffee output being exported. Only ten per cent is for domestic consumption. Therefore, to avoid slow value added tax refunds for enterprises and to reduce the burden of frozen capital and loan interests, we would like to propose a removal of value added tax on the circulation of goods in the domestic market. There should be an agency for calculating taxes of imports, so that there is a taxable price applied for the whole country and the price should be announced 15 days ahead of implementation. The Ministry of Finance should consider the calculation of taxable prices on instant coffee products.

Concerning tax refunds, the General Department of Taxation should issue concrete regulations on the time designated for tax verification. For newly established enterprises, taxation agencies currently examine first and then provide tax refunds whereas it should be the other away around. This is a disadvantage for newly established enterprises in competition and customer attraction.  

Pham Thi Loan - Director of the Viet A Company

"In many cases, customs officials force enterprises to complete customs procedures in an imprecise manner. Sometimes, enterprises have paid enough tax but the database of customs agencies incorrectly show that enterprises still owe tax. This prevents enterprises from continuing to complete their customs procedures. The Ministry of Finance should promote its education and training of customs cadres so that they do not cause unnecessary problems for enterprises. I think that tax collection should be implemented entirely on the premises of each retail shop."

Mai Thanh Hai - Chairman of the Vietnam Association of Foreign-invested Enterprises

"Enterprises suffer great losses in the golf course business due to a high land use tax. The increase in the tax rate from 25 per cent to 28 per cent has resulted in an inequality among enterprises. This has resulted in a strong reaction from foreign-invested enterprises partly due to unstable policies. They accept the high tax rate but I think that there should be reasonable and stable policies in order to promote Vietnam as an attractive destination for investment. Equality in personal income tax between Vietnamese and foreigners should be implemented shortly. This tax should be based on total income regardless of origin. There should be a tax law applied to all enterprises, foreign or domestic, to avoid discrimination."

Nguyen Minh Phu - Director of the Trans-Pacific Service Company

"The examination of exports in containers should be implemented in the warehouses of enterprises. Currently, many goods items are packed directly into containers and consequently it is troublesome for enterprises if customs agencies ask to open containers. I hope that legal policies would create an open and favourable environment for enterprises.

VCCI should establish a commission to gather ideas and comments of enterprises and provide advice to authorised agencies, policy makers and the government.

Nguyen Duy Suu - Director of the Nghe An Container Joint-stock Company

"Slow tax refunds are one of the more urgent issues for enterprises, but the most troublesome issue is the requirement of so many documents. If the Ministry of Finance based tax refunds on export activities of enterprises, instead of requiring them to submit all documents, refunds would be implemented much faster. Moreover, local and central taxation agencies should agree to avoid counterproductive and contradictory documents and regulations, which obviously make the whole much more confusing and slower."

Alan Young - Managing Director of Vietnam Industrial Investment Ltd. (VII) of Australia.

"We would like to present some ideas about administrative procedures relating to corporate income tax (CIT) reimbursement due to the reinvestment of a number of VII projects in Vietnam.

At present, the total investment of VII in Vietnam is about US$70 million that is poured into four projects, including two projects in Hai Phong City: Vinausteel Limited and Structure Steel Engineering Ltd., the Austnam Company Limited project in Hanoi and the VRC Weldmesh (Vietnam) Ltd. in Ho Chi Minh City.

In December 2002, the Ministry of Finance (MoF) approved the model of reinvestment of VII and we then submitted a dossier applying for CIT reimbursement. However, up to now we have not yet received an official decision on the tax refund. While the MoF understands and facilitates our investment in Vietnam and the tax refund progress, the General Department of Taxation and the Hai Phong Department of Taxation has often caused us problems. For example, we received a response saying, "the dossier for CIT refund due to reinvestment into Vinausteel project has been approved and was sent by Hai Phong Department of Taxation to the General Department of Taxation in May 2003 but we have still not received the official decision for tax refund." However, since then, instead of a single submitting of documents, the General Department of Taxation has required us to supplement documents for the tax refund on numerous other occasions. The issue here is that that the legal requirements have not been specified by the law, especially in the law on foreign investment nor in the Circular of the MoF providing guidance on tax applications for foreign-invested enterprises."

• DKP