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MOF and businesses disagree on natural resources
Enterprises have warned that the high tax on natural resources will have a negative impact on Vietnam’s investment sphere. Responding to the worries about the investment environment, the ministry stated that the tax on natural resources alone does not “tell the whole story.”
The Ministry of Finance (MOF) is compiling the draft law on natural resources taxation, which will be submitted to the National Assembly for ratification and enactment in 2009.
The draft law only focuses on making some changes in technical issues relating to tax calculation and taxable prices, while there have been no changes in the tax rates in comparison with the currently valid Ordinance on Natural Resources Tax promulgated in 2008.
However, the law compilation serves as a good opportunity for enterprises to call on the Government to lower taxes on natural resources.
Under the ordinance, metals have a tax rate of between five and 30 percent, while non-metals have a rate of 3-15 percent, crude oil has 6-30 percent and natural gas and coal has 0-25 percent. Forest products are now taxed at 10-40 percent, natural seafood 1-2 percent, natural water 0-5 percent, natural water used for hydropower plants 2-5 percent. Other natural resources are taxed 0-20 percent.
The tax rates have been applied since 2008, which are higher than the previous tax rates. Tax increases aim to encourage those institutions that exploit and use the natural resources to use them in a more suitable and economical way. The tax hike also aims to increase the amount of money for the state budget, since the contribution of the use of the natural resources to the national budget remains very low when compared with its potential.
The tax increases were applauded by many experts, who thought that many kinds of natural resources of Vietnam have been exported as raw materials too early, rather than being used to develop local industries.
However, businesses disagree. They say that the current tax rates on natural resource exploitation are overly high and will not attract investment. Enterprises have anonymously asked to reduce the tax rates on most of kinds of natural resources to attract investment, especially foreign investors.
The businesses say that as Vietnam is rich in natural resources, they need to be exploited in the most effective way to serve Vietnam’s development. Unreasonable tax rates have made it difficult to attract investments, which explain why foreign direct investment accounts for just one percent of total foreign investment in 2009.
Bill Howell, an economist of Vietnam Business Forum, has warned that if the drafted law on natural resources is ratified, Vietnam will lose its advantages in attracting foreign investment in comparison with other countries in the region.
Representatives from the Gold Business Association also said that with the tax rates, gold exploitation will have to shut down and shift to trade illegal imports. Besides, the high tax rates will prompt enterprises to push up illegal exploitation.
The Wood and Forestry Products Association has also warned that with these tax rates, no one would dare spend money on deforestation and forest exploitation, while illegal wood exploitation will still be an issue.
However, complaints and warnings are not having an effect on the Ministry of Finance. The ministry believes that the currently applied tax rates are reasonable and serve the purpose of protecting natural resources and encouraging institutions to use them in the most effective way.
Phuoc Ha
vietnamnet
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