LCD tax loophole found, with big losses

Tech heavyweight Panasonic owes a substantial part of the tax arrears Photo: Le Toan

Phan Minh Le, deputy director of the Ho Chi Minh City Customs Department, noted in a recent report to Vietnam Customs, “After post-clearance checks, firms admitted that the adjustment of the HS code of LCD products is right.” An HS code classifies a traded product according to an internationally-standardised system.

Under the intended tariff rate, firms would have had to pay a 3 per cent import tax instead of 0 per cent.

According to the report, firms imported these LCD-coded products valued at VND16,056 billion ($729.8 million).

Panasonic AVC Vietnam is reported to have 891 customs declaration numbers that snuck through with a 0 per cent tax, valued at nearly VND1.956 trillion ($88.9 million) for their imported products.

LCD stands for liquid crystal display – a flat-panel display or other electronically-modulated optical device that uses the light-modulating properties of liquid crystals. LCDs are used in a wide range of applications including computer monitors, televisions, instrument panels, aircraft cockpit displays, and indoor and outdoor signage.

The misattributions were discovered in a review of information on the customs data system. HS codes that should have fallen under LCD product numbers were instead attributed to the categories of TV panels, LCD panels for producing LED screens, backlighting, and liquid crystal display – all of which have import tax rates of 0 per cent.

According to the Ho Chi Minh City Customs Department, citing a guideline by the General Department of Vietnam Customs, some of these product types are listed in a 3 per cent tax category.

However, firms complained that the guideline had only been circulated internally within customs agencies and not made known to the public.

In 2016, the Ministry of Finance issued a judgement saying that Panasonic’s LCD backlighting belongs to HS code 8529.90.91, and import taxes must be imposed at a 3 per cent rate.

The Ho Chi Minh City Customs Department said, “The tax arrears are large VND481.68 billion ($21.89 million), so we must consider the appropriate means of collection.”

According to its website, Panasonic AVC Networks Vietnam Co., Ltd. was founded in 1996 as a joint venture. As from August 1 2014, the company was transformed to a 100 per cent foreign invested company. The company manufactures and sells a wide range of televisions and other audio-visual devices with premium Japanese quality and technology.

Panasonic AVC Networks Vietnam Co., Ltd. is one of six Panasonic companies operating in Vietnam.