Move to scrap grace period on import taxes draws fire
Move to scrap grace period on import taxes draws fire
Exporters have slammed the proposal to remove the 275-day grace period on tax payments for imported raw material for local production.
They believe it will lead to more difficulties in their export and production plans.
The Ministry of Finance, the drafter of the Law on Tax Management, proposed to remove the grace period to limit tax fraud and evasion. The ministry planned to amend Article No 42 so the law would require taxes to be paid before customs clearance.
The amended regulation would apply to businesses that outsourced for foreign partners who imported materials and made products domestically for export. In principle, businesses still could enjoy the grace period if they were guaranteed by commercial banks.
However, Viet Nam Textile and Apparel Association (Vitas) said it was nearly impossible to obtain a guarantee from a bank because of their overly strict requirements. Businesses would have to pay a deposit and mortgage assets plus a fee. Vitas said garment companies would have to arrange US$800 million a year to pay tax and only get a tax refund later.
Many businesses, especially foreign-invested, had exploited the tax payment grace period. Some foreign-invested garment and textile enterprises owed a huge sum of tax on imported raw materials and then went out of business, according to the Ministry of Finance.
Customs reported that the tax debt had reached VND1.496 trillion (US$71 million) by the end of August this year.
A senior executive of a garment company said that with a stricter regulations it would take businesses much more time to follow the procedures for importing each consignment of goods.
The problem of garment companies was that they had to import different kinds of materials from different supply sources while import consignments arrived at different times of the year. They would have to spend too much time following procedures to get imports cleared. The delay in customs clearance would badly affect their production plans, and businesses would be punished for late deliveries.
Ministry of Industry and Trade import-export department deputy director Pham Thi Dieu Ha said the ministry received feedback from five associations concerning the lifting of the grace period.
Ha said, as the Ministry of Finance had reported, many businesses were involved in trade fraud and tax evasion, causing losses to the State. However, authorised agencies said honest businesses should not be blamed for the deeds of violating businesses and strict measures introduced which caused difficulty for local production and export activities.
Regarding the fisheries sector, imported raw materials to process products for export accounted for 15 per cent of a processor's revenue. If the current regulation on the grace period was lifted it would discourage seafood importers from buying materials for export processing.
For instance, if seafood processors spent $60 million annually to import raw materials for processing, they would have to spend an additional sum of VND70 billion ($3.3 million) to obtain the guarantee from banks.
The tax payment grace period was to support production and exports. Violating businesses alone must be held responsible for their violations, while honest businesses should not be punished, said a company respresentative who required to be anonymous.
Sharing this view point, Viet Nam National Petroleum group (Petrolimex) deputy general director of Pham Duc Thang said lifting the 275-day grace tax payment period was not a good solution to ensure tax collection for the State as it caused difficulties for businesses.
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