Enterprises yet to Agree on Taxable Prices of Automobiles

Enterprises yet to Agree on Taxable Prices of Automobiles

Twenty three Vietnamese automobile importers have been suspected by the General Department of Customs of tax evasion. This has become an urgent matter for enterprises. In the context, on May 9, 2005, the Vietnam Chamber of Commerce and Industry (VCCI) organised a conference on taxable prices of imported automobiles to create a direct dialogue between these enterprises and the General Department of Customs. Concretely, this was an opportunity to settle the enterprises' urgent matter after the customs agency suddenly increased taxable prices of imported automobiles.

Tax and customs procedures are often hot issues, which draw much attention from enterprises.  Last year, VCCI co-operated with the Ministry of Finance to organise two meetings between enterprises and management agencies to settle the urgent matters of enterprises. Also, in the annual meeting between the Prime Minister and enterprises last October, urgent issues on tax and customs procedures were raised. The Prime Minister and representatives from ministries and agencies answered enterprises' questions and the settlement of these issues have gained initial results.

Regarding the compliance of the Vietnamese law with regulations of the World Trade Organisation (WTO) in terms of taxable prices, Nguyen Khanh Ngoc, from the Vietnam International Centre of Arbitration said that the existing law and institutions on customs were basically compliant with WTO's regulation. However, this does not mean that they meet all requirements of the organisation. This is a possible reason of the fact that Vietnamese automobile importers and taxation agencies have yet to find a common language.

Most ideas raised at the conference proposed that taxation agencies should not apply selling prices of enterprises and there should be regulations stipulating taxable value of each kind of product. Nguyen Anh Dung, director of the Inland Road Equipment Company, stressed that taxation agencies should not refer to online prices. Instead, they should consider the agent level of suppliers before stipulating their prices.

The enterprises propose that taxation agencies should let them know immediately whether they observe all regulations or not, instead of waiting for five months.

Answering questions raised by enterprises, Dang Thi Binh An, deputy director of the General Department of Customs, clarified the existing taxable prices and the methods for taxable price calculation of the General Department of Customs. In particular, she stressed that from October 1, 2004, the General Department of Customs changed its taxable value calculation. She affirmed taxable prices were calculated based on transaction prices in a fair competition environment and within five years, taxation agencies were entitled to probe any enterprise if it was suspected of tax evasion.

Vietnam has now around 50 enterprises importing automobiles. An said that to create favourable conditions for the two sides, enterprises should promote their co-operation with customs agencies. This means that enterprises should change their mind that within the time stipulated by the law, customs agencies were entitled to investigate if there was any suspicion. She went on to say that Vietnamese customs agencies co-operated closely with foreign customs agencies, so they had enough documents about goods imported by Vietnamese enterprises and their foreign partners.

In recent years, the Vietnamese law on customs taxable prices has been considered to have accessed all the regulations and standards on international trade of WTO. This can be seen not only via the number of issued documents but also via their content. These include the 1991 Law on Import and Export Tax, the Government's Decree 54/CP dated August 28, 1993, the Customs Law, the Circular Letter 118/2003/TT-BTC of the Ministry of Finance. The inputs and comments made by enterprises during conferences and symposiums have contributed to the wind of change.

Value should be calculated based on standard and quality of automobiles
Nguyen Tuan Anh, director of the Dai Duong Trade and Fine Arts Joint Stock Company

In March 2005, we imported three Mercedes-Benz CLS350, observing all the regulations of the State. However, we were very surprised when we received a letter of the Haiphong customs agency because without any investigation where the customs agency got market information as it stated in the letter. If our automobiles are as expensive as they are stated to be in the customs agency's letter, how many Vietnamese people dare to buy them and how many enterprises dare to import them?

The Haiphong customs agency calculates that a high-end Mercedes-Benz CLS350 with enough accessories costs US$45,000 in Hong Kong. After being imported in Vietnam, the car costs around US$180,000. In fact, we sold them at VND 1.2 billion (around US$75.900).

Enterprises which import automobiles and motorbikes in Vietnam are trying to import cheap automobiles and motorbikes, or customisable ones with minimum options, ensuring that they do not cost too much but still can operate safely. Only by doing so, can enterprises sell automobiles and motorbikes in the Vietnamese market and earn profits. Foreign partners have good understandings of the situation in the Vietnamese market, so they always satisfy Vietnamese importers. As a result, we are easy to select automobiles which are yet to be available in Vietnam or costs too much. For example, a Toyota Zace GL of Toyota Vietnam costs US$29,800.  We can import the same car at a price of US$4,500. The selling price in Vietnam after import procedures are completed is put at around US$18,000.

We cannot be branded as tax dodgers as we have been by the mass media recently as we have completed all our obligations and contributed tax to the State budget, observing all the regulations of the Vietnamese law and international trade practice.

Decisions on collecting added tax of imported automobiles should be reviewed
Bui Huy Thuc, director of a branch of the TECHNOIMPORT in Haiphong

After four months' hearing, the Haiphong Department of Customs issued announcements on rejecting the value we have declared and on that basis, probing customs agencies have issued decisions to increase tax for six investigated declaration documents and other documents which are yet to be probed. Added tax for these documents reached VND 13 billion. So far, we have not received any reply about our petitions.

To create a transparent and stable business environment we propose that authorised agencies should review the decisions on collecting added tax of imported automobiles. Also, amendments should be made to legal documents on taxable prices with concrete content about implementation timing and steps, as well as the responsibility of each individual, enterprises and authorised agencies. We hope that VCCI will continue to help enterprises by organising meetings for relevant parties to exchange ideas and make proposals to State management agencies on amending the existing legal documents in compliance with commitments between the Vietnamese and foreign governments, organisations, removing regulations which are unfeasible in the context of Vietnam's promoted international integration. Also, we hope that VCCI will help us raise our matters to the authorised agencies for early settlement.

Results of hearing should be informed to enterprises immediately
Pham Son Dong, director of the Minh Dao Company

The Minh Dao Company specialises in forwarding, and import and export. To increase revenues in order to increase our contribution to the State budget, from November 2004, we began to import sedans. We have completed customs procedures and paid all tax as we were informed by customs agencies for all of our imported automobiles, which have been granted with certificates of origin and sold to Vietnamese customers. We had hearings with the Haiphong Department of Customs. However, the customs agency did not announce the hearing results within five days as stipulated in the Circular 118/2003/TT-BTC of the Ministry of Finance. Therefore, we thought that customs agencies had accepted the value we have declared.

The Haiphong customs agency calculated prices of automobiles without distinguishing whether they are petrol-run or diesel-run. In fact, there is a big difference in prices of the two kinds of automobiles. As far as I am concerned, the customs agencies have yet to properly calculate taxable prices and announce hearing results to enterprises. As a result, they do not have a good understanding of prices and technical specifications of each kind of automobile.

• Nguyen Thoa