Rolling out the "red carpet" at border gates: are investors vulnerable?
Rolling out the "red carpet" at border gates: are investors vulnerable?
The closing of G.C., the largest duty-free supermarket at the border gate economic zone of Moc Bai (Tay Ninh province), has posed questions about rolling out the "red carpet" for businesses at border gate economic zones in Vietnam.
On Nov 26 2013, the Prime Minister signed Decision 72, applicable from May 15 2014, on not selling tax-free wine, beer etc. for tourists, including buyers from Cambodia at border-gate economic zones.
Subsequently, on May 15 2014 the Ministry of Finance issued Circular 109, applicable from Oct 1 2014, on immediate taxing (import duty, luxury tax, value added tax), on goods imported from foreign countries into non-tariff zones. Companies in the border-gate economic zone of Moc Bai said they had to close because of these regulations.
“Death" caused by policy change
According to G.C. supermarket, the regulations almost completely eliminated benefits and incentives for businesses operating in the border-gate economic zone of Moc Bai. Without preferential policies, these firms incurred prolonged losses.Reportedly, G.C. imported foreign liquor worth VND19 billion (nearly $1 million) before Decision 72 was issued and it suffered losses of about VND3 billion (nearly $150,000).
After almost 10 years of operation, most of the tax-free shops at the Moc Bai border-gate economic zone have closed, while the rest are trying to sell their inventory.
Tran Thi Bich Huyen, Director of Song Chau minimart, said businesses did not dare import goods because of the frequent change of policies.
Huyen said having to pay taxes immediately upon imports of goods, capital becomes stuck with goods. Some imported products as food and cosmetics have import tax rates of 10-25%, plus VAT of 10%, totaling 20-35% of capital.
The tax is refunded when the shipment is sold. However, a shipment of hundreds of products is usually sold after a year, Huyen said.
According to Huyen, if the state calls for businesses to invest in Moc Bai, it should give stable incentives within 10-20 years. If the policies are changed within one to two years, it would be difficult for businesses.
Representatives of the Tay Ninh provincial economic zone management board said the policy change had a major impact on businesses and almost completely eliminated their interests, so many companies have withdrawn from the Moc Bai border-gate economic zone.
Waiting for amendments
Pham Van Son, Deputy Director of Tay Ninh Provincial Economic Zone Management Board, said Tay Ninh had proposed to agencies to reconsider the policies.
Some Japanese and Malaysian investors have reportedly canceled negotiations to open duty-free supermarkets here because of concerns over policy change.
To facilitate business enterprises operations, the policy needs to conform with the current reality.
Businesses are waiting for adjustments to policies of the Government and relevant ministries to remove the difficulties and losses for businesses.
This situation has occurred at border gate economic zones in other countries. Many calls for help have been sent but there is no hope of "reviving" border-gate economic zones. Many companies have bitterly exclaimed: "Who knew that at the end of the red carpet would be ... pain and hurt!"
