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Garment firms fear import duties

Update: August, 24/2012 - 11:11


Workers of Vinh Phuc-based Dai Loi Products and Trading Joint Stock Co make clothing for export. — VNA/VNS Danh Lam
HA NOI — Garment exporters have expressed their concerns over the approaching end to a grace period on duty payments for raw materials and accessory imports.

Under the current Import and Export Tax Law, enterprises that import raw materials and accessories for production of goods for export receive a 275-day grace period on duty payments for their imports.

A draft for the revised Import and Export Tax Law and Tax Management Law eliminates the tax payment deferment and requires enterprises to pay tax before customs clearance, or provide a guarantee from a credit institution.

The move partly stems from the fact that many exporters are taking advantage of this rule to evade taxes, causing difficulties for tax offices and State budget losses.

However, the removal of this grace period would put pressure on enterprises that operate legally, said businesses.

Pham Xuan Hong, director general of Sai Gon 3 Garment JSC, said: "It feels like we're standing on top of a trapdoor that could open at any time."

For instance, if the rule was applied in the fourth quarter of this year, his firm would have to pay VND26 billion (US$1.24 million) in import taxes, and in the first half of 2013, that figure would reach VND50 billion ($2.4 million), he said.

"The only way we can get that sort of money ready on time is by taking out a loan, but interest rates are still high," he added.

Nhu Hong Hanh, an export official from the Viet Tien Garment Corporation, said: "For FOB (free on board) contracts, raw materials and accessories are classed as temporarily-imported and re-exported goods so it is not necessary to force enterprises to pay taxes immediately, while tax refund procedures are extremely complicated and cumbersome."

Dang Phuong Dung, deputy chairwoman of the Viet Nam Textile and Apparel Association (Vitas), said the association had sent a document to the Ministry of Finance (MoF) asking it to reconsider the proposal.

However, MoF was determined that if enterprises did not want to pay taxes immediately, they should ask commercial banks for a guarantee, but not all of them can satisfy the banks' requirements.

Guarantee procedures also caused difficulties for exporters because they were time-consuming and involved mortgaging assets or temporarily freezing bank accounts, Hanh said.

If it was impossible to collect taxes from illegally operated or bankrupt firms, it would be unfair to punish law-abiding companies by collecting levies from them instead, Dung said. — VNS

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