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Tax break anomalies discourage consumption of homemade goods
Existing irrationalities in tax incentive policies are responsible for domestic businesses preferring to export their products instead of selling them locally, a HCM City trade department official says.
This undermined efforts to reduce the trade gap and fight the use of dollars in the economy, said Vu Van Hoa, who heads the HCM City Industrial Park and Export Processing Zone Authority (HEPZA) with Sai Gon Giai Phong Newspaper.
Domestic businesses were exempt from value-added tax when exporting their products overseas but had to pay it if they sell their goods in the domestic market, he said.
This meant local consumers had to buy several made-in-Viet Nam goods under foreign labels at higher prices, he said.
Unsuitable tax incentives for businesses in export processing zones (EPZ) have also hindered exporters from purchasing raw material locally, which would normally save them time and transportation costs, said Nguyen Quoc Anh, Head of production unit of Gunze Vietnam Company Ltd.
This was because EPZ-based businesses were exempt from value-added tax when importing raw material, but when they wanted to buy it locally, they had to pay prices that had value-added tax included in it by the suppliers.
Local suppliers did this to avoid cumbersome tax refund procedures, Anh said.
This situation has resulted in a mere US$800 million worth of raw material purchased by EPZ exporters from local suppliers each year, a modest figure compared with the supply capacity of local businesses, he added.
Meanwhile, imported fully-assembled or complete built computers were much cheaper than locally-made ones thanks to the zero import tax rate, said Nguyen Huynh Thy Khoa, director of the Long Vu Trading and Service Co., Ltd.
Khoa said the ASEAN Free Trade Agreement (AFTA) stipulates that tariffs are eliminated on fully-assembled computers imported from ASEAN countries, while electronic components used in assembling local computers are subject to a two per cent import tax.
The zero tax rate on goods from ASEAN countries has also facilitated the inflow of goods from Europe that are routed through the regional bloc to avoid import tariffs, Khoa said.
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