Foreign holding companies evade tax through trade fraud
25-06-2015 13:19:13+07:00
Foreign holding companies evade tax through trade fraud
Many foreign invested enterprises (FIEs) established in Vietnam have helped their holding companies commit trade fraud.
In 2010, Angang and Quyky Yanglei, two coat-hanger manufacturers, became subjects of an investigation by Vorys, representing US manufacturers.
Analysts have warned that Vietnamese enterprises face the risk of losing foreign markets because of trade fraud by foreign invested enterprises.
Vietnam involved in misfortune
Some countries in the world are investigating imports suspected of trade fraud. The imports may have been made in China, but were then carried to Vietnam from where they are exported to third countries as products of Vietnam to avoid countervailing duty.This explains why many foreign investors have set up businesses in Vietnam, but have not set up factories. They mostly import products from other countries, then conduct simple work on the products before re-exporting to third countries.
Brazil has recently decided to impose an anti-dumping duty of 250 percent on footwear materials and finished products sourced from China.
Chinese businesses have sent footwear products to Vietnam and re-exported them to third countries. Trade fraud commitments have led to misfortune: the same anti-dumping tax rate of 250 percent has also been imposed on Vietnam’s exports to Brazil.
Vo Ba Phu, deputy head of the Competition Administration Department (CAD), an arm of the Ministry of Industry and Trade said that in many cases the decisions by countries on imposing anti-dumping duties on Chinese products have been often followed by an anti-dumping duty imposition on Vietnamese products.
Vietnam’s bicycle imports to the EU once faced the problem. Luckily, the EU later announced it removed the countervailing duty on Vietnam’s bicycle exports, while maintaining taxation on products from other countries, especially China, with the average tax rate of 48.05 percent.
According to experts, there are three kinds of behavior related to avoiding tax. The most serious one is counterfeiting Vietnamese C/O (certificate of origin) and exporting products with Vietnamese C/O to be able to enjoy preferential tax.
Second is the import of materials and products from other countries, and packing of products with a ‘made-in-Vietnam’ label. Third, foreign investors have set up factories in Vietnam which specialize in assembling import materials and then export products with Vietnamese C/O.
