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The bitter sorrows of businessmen: Going wrong
The enactment of the VAT law created an inherent disadvantage for many businesses. When one’s business is at the point of going under, what is one to do?
At the conference on reviewing the impacts of Vietnam’s WTO admission on Vietnamese businesses in mid April 2009, an elderly woman, white-haired, asked leave to speak.
“Please allow us to become decent people,” she said.
The woman was Nguyen Thi Cuc, Chairwoman of Ba Nhat Cooperative, which makes export products from bamboo and rattan. It is a famous business in HCM City.
Cuc said that problems in the VAT tax law have hindered the development of many economic branches, especially agricultural production, and consequently forced many businesses to commit fraud to stay afloat.
Ba Nhat exports products to dozens of countries in the world, provides jobs for thousands of labourers from poor rural areas.
Cuc related that her cooperative was forced to commit fraud.
In order to be eligible for tax refunds on exports, businesses have to present documents and invoices for input materials.
Meanwhile, “Ba Nhat purchases all input materials from farmers, how can it get invoices then?” Cuc asked. In order to get tax refunds, the cooperative purchased invoices from other businesses.
Dang Quoc Hung, Director of Kim Boi Handicrafts and Fine Arts Company, said that when purchasing invoices, besides paying a 1.6 percent tax, businesses have to pay additional money to “intermediaries”. The total sum of money businesses have to pay for purchasing invoices may reach two percent of consignments’ values.
The problems in the VAT tax law
“In fact, the problems in the VAT tax law appeared right after the law went into effect,” said Nguyen Lam Vien, general director of Vinamit, a farm produce processor and exporter. However, businesses have only spoken out recently, as problems have been increasingly hindering their plans to develop the domestic market.
Previously, as businesses could not get tax refunds on domestic sales, businesses did not develop their distribution networks in the domestic market. However, as export markets have narrowed, they have had to return to the domestic market.
Deputy Minister of Industry and Trade Nguyen Thanh Bien at a recent business forum in HCM City related that the North and South Food Corporation, the two biggest food trade corporations in Vietnam, which export millions of tonnes of rice every year, do not have any retail shops in the domestic market.
It is because of problems in the VAT tax law. If they export products, businesses get tax refunds, while if they sell domestically, they have to pay a tax of 5%.
Vien from Vinamit said that the currently applied methods of calculating VAT and tax deductions only benefit the intermediaries who purchase rice directly from farmers, as they don’t have to pay VAT.
“Like many other legitimate businessmen, I want to be a decent person. However, it seems that the more transparent your business is, the greater the risks you have to face,” Vien said.
VietNamNet, TP
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