Seafood firms angle for tax break

News 16:10 24/10/2012 Kim Thu
Seafood companies that import raw materials for processing exports have asked the Government to extend their 275-day grace period for paying import duties.

The grace period is allowed under the Import and Export Tax Law for companies that import raw materials and accessories for production of goods for export.

The Ministry of Finance, however, has recently compiled a draft on the revised Tax Management Law that requires companies to pay tax before customs clearance, or provide a guarantee from a credit institution before they can secure the 275-day grace period.

Speaking at a seafood-industry conference held in HCM City yesterday, Nguyen Hoai Nam, deputy general secretary of the Viet Nam Association of Seafood Exporters and Producers (VASEP), said many industries that rely on imported materials, especially seafood, electronics, footwear, and textiles and garments, were surprised about the draft's content.

Most seafood companies have to import materials since local sources only meet 60-70 per cent of their production capacity.

Conference participants said that companies would encounter more financial difficulties and would have to scale down production if the changes to the grace period were approved.

They also pointed out that banks charged 2-3 per cent a year for guarantee fees, plus interest rates, pushing up production costs and product prices, affecting the competitiveness of Vietnamese goods.

Nam said Viet Nam imports about US$600 million worth of seafood materials each year. With an average tax of 20 per cent, seafood companies would have to pay a total of $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 in bank-guarantee and interest rate fees, Nam said, adding that this was unreasonable.

VASEP sent a letter to the General Department of Customs under the ministry, asking that the proposal be shelved.

But the Customs Department rejected the request, saying that many exporters were taking advantage of the grace period to evade taxes.

The department said enterprises could use letters of credit for their future shipments as collateral.

"In the current economic downturn, seafood buyers do not want to use letters of credit," said Nguyen Xuan Nam, general director of Hai Vuong Co, Ltd.

Nam also complained about the complicated procedures for tax refunds, saying that it took much time and affected company's cash flow.

Nguyen Thi The Yen, director of Hai Long Nha Trang Company, said she was worried that her company would go out of business if the draft regulation is approved.

Under such tough economic times, the State should create more favourable conditions for enterprises to cut down expenses and boost exports, many conference participants said.

During the meeting, conference attendees asked the Government to eliminate import tax on seafood raw materials, which they said Thailand and other countries had done.

VASEP and companies in garments and textiles, electronics and footwear plan to send requests to the National Assembly and other agencies about this issue.

In the last five years, seafood material imports rose sharply, from $247.7 million in 2007 to $541 million last year, contributing $400-900 million a year to total export revenue. 

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