Vinacomin’s successful dig for coal tax relief

A representative from the Ministry of Finance’s (MoF)  Import and Export Tax Department said that the ministry was drafting a circular to revise the export tax rate for coal from 20 to 10 per cent in accordance with the prime minister’s approval.

“The move is to save Vinacomin from current difficulties in business,” said the representative. According to the MoF’s proposal lodged with the prime minister, domestic consumption and exports of coal have strongly decreased, resulting in high inventories. Vinacomin has been on the verge of stopping coal exports due to high price pressures, while the international coal export price had decreased.

Vietnam has been applying an export tax rate of 20 per cent for coal since September 2011, which made it difficult to compete with other countries which offer lower tax rates such as zero per cent in Indonesia and Australia, 5 per cent in Russia, 7 per cent in Mongolia and 10 per cent in China.
In May, Vinacomin asked the prime minister to lower the coal export tax rate down to zero per cent but that proposal was rejected.

The MoF estimated that if the coal export tax rate of 10 per cent was applied, Vinacomin would export 6.5 million tonnes of coal in the next four months, which would help it release inventories and balance its financial situation in 2012.

However, many experts said that this reduction for coal export tax rate was contrary to the government’s guidelines not to encourage coal exports. Economic expert Nguyen Minh Phong said the coal sector’s nature was different from others because coal was a mineral resource and its inventory could not be compared with other sectors, such as textile and garments. “A reduction to push up exporting coal means that we are exchanging our resources with foreign currencies,” said Phong.

Vu Dinh Anh, deputy head of the MoF’s Institute for Market and Prices, said more importantly Vietnam needed a more effective strategy for coal usage, especially when the country was likely to import coal to meet the domestic demand.

For that reason, Anh said, Vietnam should stop exporting coal soon. Vinacomin recently said it sold 21.8 million tonnes of coal in the first seven months of this year, approximately 48 per cent of the annual goal. The number included exports of 7.2 million tonnes, which fell 27 per cent over the same period last year. The group added that as of late July, it had an inventory of more than 9 million tonnes of coal.