According to the Circular Draft on rubber product tax rates recently approved by the Ministry of Finance, some rubber products in group 4001 and 4002 will be subject to tax increases from 3 to 5 percent. However, this new tax rate has raised increasing concern among rubber enterprises.
According to the Vietnam Rubber Association, in the first 7 months Vietnam exported 340,000 tonnes of rubber, earning US$1.5 billion, up 70 percent against last year. Export price also increased by 60 percent year on year.
Tax should be a development incentive
Mr Le Van Tri, Deputy General Director of Casumina Company, analysed that taking tax policies in some countries for reference, export tariffs imposed on natural rubber varies depending on each country’s development strategy and economic characteristics. For example, Indonesia has the largest rubber planting area in the world and is ranked 2nd in the world in export, and the tax rate imposed on natural export rubber is zero. Malaysia ranks third in natural rubber export, and imposes a fixed rate of 13.92 cent per kilo (about 1 percent of export price), in which 4 cent per kilo go to the research budget and the remaining 9.92 cent is for assisting farmers to re-plant.
Thailand, the world’s leader in exporting natural rubber with productivity of 3.25 million tonnes per year, only imposes export tariff of THB 1.4 per kilo. Since October 2010, Thailand has increased export tariff to THB 2 per kilo. If the export price is lower than THB 80 per kilo, the rate is about 2.5 percent; if the price is from THB 80 – 100 per kilo, the rate is about 3 percent and if the price is over THB 100 per kilo, the rate is about 5 percent. However, according to Mr Tri, Thailand’s purpose of increasing tax is to raise national budget for rubber industry, assisting farmers when they re-plant and when the price reduces to lower than ground price, as well as to encourage foreign investment into manufacturing rubber products in Thailand with cheaper inputs.
As for Vietnam, the government has encouraged rubber production and export in recent years; thus significantly increasing rubber cultivation and productivity. At present, Vietnam is ranked the fifth largest rubber producer and the fourth largest exporter in the world. In 2010, Vietnam produced 754,500 tonnes on 740,000 hectares; and 2011 productivity is expected to be 780,000 tonnes on 770,000 hectares.
Official Dispatch 2215/BNN – CB signed by Deputy Minister of Agriculture and Rural Development Bui Ba Bong, recently sent to the Ministry of Finance, indicated that in Decision 750/QĐ – TTg approving the plan of developing rubber by 2015 and vision to 2020, the Prime Minister determined the development target by 2015 of 800,000 hectares of rubber area with latex output of 1.1 million tonnes. Accordingly, many policies are attached to foster rubber industry development, in which there’s a policy on not collecting export tariff.
Moreover, at present, processing latex of Vietnam is mainly for export. Domestic rubber manufacturing factories only consume about 18 percent of national output. Therefore, Ministry of Agriculture and Rural Development proposed that the Ministry of Finance not collect export tariffs from rural rubber products coded HS 4001 with quality inspection certificate from national quality inspection offices, since this is the encouraged export product.
Also according to experts in the industry, with as many fluctuations as currently, export tariff on natural rubber shouldn’t be collected to boost area and productivity increases. The reason is, after the crisis in 2008, rubber industry has continuously met difficulties, such as increasing interest rates, which has greatly impacted the industry’s development. Even in harvest season, the rubber price fluctuates unpredictably. Imposing a tax rate of 5 percent on natural export rubber in 2011 will restrain the industry’s investment and development speed, influencing production and export.
Representing the Vietnam Rubber Association (VRA), General Secretary Tran Thi Thuy Hoa said the Ministry of Finance’s draft proposing increased export tariff on rubber in group 4001 and 4002 from 3 percent to 5 percent should be re-considered, since this is an agricultural product encouraged for export. In addition, the tax rate imposed at this time will cause enterprises difficulties when many have signed long-term contracts. Therefore, Ms Hoa petitioned the Ministry of Finance to consider carefully and not impose too rapidly this tax on natural export rubber.
Tax imposing should be clear and predictable
According to Mr Nguyen Tri Ngoc, Director of Cultivation Department , Ministry of Agriculture and Rural Development, at present, Malaysia’s export tariff on rubber is over 1 percent, Thailand’s is 1.2 percent and tariff increases are on the agenda, calculated on export price increase but not added up into one rate. Notably, all export tariffs Thailand and Malaysia collect are re-invested to develop rubber industry in these countries.
Not denying the Ministry of Finance’s opinion that export tariff should be collected, Mr Ho Ngoc Ha Thi, Deputy Director of Export Department, Vietnam Rubber Group, suggested it is necessary to consider when and at what rate taxes will be levied. Especially, there should be a clear agenda so tax collection is not only to increase national budget, but also to assist the rubber industry in developing sustainably.
The Vietnam Rubber Association and Vietnam Rubber Group have sent dispatch to the Ministry of Finance on the draft of rubber export tariff. The dispatch clearly figured that the Ministry can keep export tariff rate of 5 percent on synthetic rubber products in group 4002, which are temporary import for re-export ones, and impose a 3 percent rate on compounded rubber coded 4005. From 2012, a 1 percent export tariff rate can be imposed on natural rubber in group 4011 with consignments without quality inspection certificate from national quality inspection offices.
Deputy Minister Bui Ba Bong also noted that since 2012, the Ministry can impose a 3 percent tax rate on products not encouraged for export, to assist export rubber quality management and build up Vietnam rubber’s reputation and brand. Although similar to synthetic rubber coded HS 4002, these products haven’t been manufactured in Vietnam by being temporarily imported for re-export, so they shouldn’t face the same tax. This tax rate should be imposed on natural rubber coded HS 4001 without quality inspection certificate from national quality inspection offices.
An export tariff on rubber is needed; however it is not easy to do in such a way that encourages the industry to develop. Thus, Mr Bong said that the requirement is we should not hurry and need to work out detailed agendas for each export rubber type.
Luu Hiep
Vietnamese
