Firms need tax grace

Under the 2006 Law on Tax Administration, taxpayers have up to 275 days to complete their payments from the date of their customs declaration. But the draft amended law requires that tax payments be completed before customs clearance. Taxpayers will enjoy tax grace period only when there is a credit institution to guarantee payment.

The revised law is expected to take effective in July 2013 if approved by the National Assembly in its working session later this year.

The new regulation is said to make it difficult for enterprises in the sectors of textile, garments, wood processing and electronics to import materials that serve in the production of export goods.

“I think this revision will restrict the abuse of the period of grace for tax payments. However, it may harm policies that encourage exports and hamper production and business operations,” said Than Duc Nam, a National Assembly delegate representing Danang city.

Ho Chi Minh City representative Tran Du Lich also said it had been not necessary yet to remove this tax grace period of 275 days as current regulation.

“The proposed removal is facing many strong petitions from many Vietnamese associations in many sectors such as textile, garment, seafood, handicraft and wood industry. Currently, the cost for tax payment of these enterprises is around 12 per cent of the export price. This  change is estimated to raise the financial costs by additional $1.5 billion and the export price by 1.5 per cent for enterprises,” said Lich.

“In this current difficult situation that we are trying to support enterprises to overcome, there is no reason to change a normal thing to create more difficulties for them,” he added.

According to the Vietnam Garment Association, the new regulation would cost this industry up to $600 million per year while the turnover is just $6 billion.

“This number made more consideration to law drafters,” said Vu Huy Hoang, Minister of Industry and Trade and a National Assembly member representing Lang Son province.

Another complication, Hoang said, was that  recent reality showed that the number of enterprises that could  secure credit from banks remained limited.

Meanwhile, Minister of Finance Vuong Dinh Hue seemed unswayed, saying the new policy was aimed at restricting abuses and tax evasion.  

According to the General Department of Customs, until September 30, 2012, overdue taxes totaling VND1.497 trillion ($71.9 million) remain unpaid related to 5,784 out of the 311,943 lots of imported goods to serve production of export goods, and 961 among 5,752 contracts of export goods. About VND500 billion ($24 million) in taxes was owed by enterprises which left their business location without paying tax.