A draft on revised tax management law hinders fish import

However, Ministry of Finance has recently compiled a draft on the revised Tax Management Law that requires importers to provide a credit guarantee by credit institutions to enjoy imported tax payment grace in 275 days. The grace period is allowed under the Import and Export Tax Law for companies that import raw materials for production of goods for export.

Companies would encounter more financial difficulties and would have to scale down production if the changes to the grace period were approved.

Most seafood companies have to import materials since local sources only meet 60-70 percent of their production capacity. In the last five years, seafood material imports rose sharply, from US$247.7 million in 2007 to US$541.1 million last year, contributing US$400-900 million a year to total export revenue. Now, there are more than 400 seafood enterprises importing raw fish from almost 80 origins in the world, up 150 importers compared to the previous time.

In the first six months of 2012, Vietnam imported raw fish from 69 countries and territories in the world, worth by nearly US$331 million in which finfish in all kinds (excluding pangasius) made up 37 percent, tuna made up 30.6 percent, shrimp with over 23 percent and the rests were mollusk, crab, swimming crab and other crustacean. To touch US$2.8 billion of seafood export turnover in the first 6 months of 2012, 20 percent out of total exports was processed and exported from imported raw material.

Out of importers of raw material for processing and exporting, over 200 ones have processing plants and they have to purchase 20 – 90 percent of total raw material each year which can create jobs for over 100 thousand workers.

In the last 5 years, seafood enterprises’ production costs have surged by 70 - 100 percent. For the first time, in 2012, export price of Vietnam shrimp was US$2 - 3 per kilogram higher than that of other countries. Export price of pangasius was low. Export price of mollusk was US$1-2 per kilogram higher than average export price of China, Indonesia...Vietnam seafood enterprises’ competitiveness are less than other countries due to rocketing production costs, tax, interest rate and fees.

In the national plan of seafood processing development by 2020, Ministry of Agriculture and Rural Development (MARD) determined that seafood processing is a boost for fishing, aquaculture and logistic services in fisheries industry.

Objective to 2020, Vietnam will build a mordern seafood processing system from production, raw material purchasing to processing and distributing with high competitiveness. To attain the seafood export target of US$8 billion by 2015 and US$10 billion by 2020, Vietnam has to import 600,000 MT of raw material (estimated as US$1.2 – 1.4 billion) by 2015 and 1 million MT (US$2-2.2 billion) by 2020 serving for processing and exporting.

The draft on the revised Tax Management Law with credit guarantee is challenging Vietnam seafood enterprises in the wake of lack of capital, raw material and fierce competitiveness.

According to the draft, banks charged 2-3 percent a year for guarantee fees, plus interest rates, pushing up production costs and product prices, affecting the competitiveness of Vietnam enterprises and narrowing their business.

Vietnam imports about US$600 million worth of seafood materials each year. With an average tax of 20 percent, seafood companies would have to pay a total of US$120 million a year in taxes.

If the Finance Ministry’s proposal is approved, importers would have to pay an additional cost of $3.36 million per year in bank-guarantee and interest rate fees. This was unreasonable to enterprises.

VASEP sent a letter to the General Department of Customs under the ministry, asking that the proposal be shelved. On 15^th October, VASEP held a meeting with the participation of many seafood enterprises to collect their opinions on the draft. VASEP said it would send a report to the National Assembly and relevant agencies on this issue in the coming sitting on October 22. In addition, the association is asking for a zero import tax rate.