While Vietnamese enterprises producing goods must pay full taxes and comply with licenses and conditions, cross-border goods can enter our country's market via e-commerce without any obligations. An unbalanced game is taking place right at home.
Below is an article expressing the personal views of Mr. Pham Van Hung - a law and public policy specialist. Mr. Hung is working at the Legal Committee, Vietnam Federation of Commerce and Industry (VCCI).
A domestic cosmetics manufacturing enterprise needs to import raw materials and machinery. Enterprises must pay import tax on these raw materials. At the same time, businesses must carry out cosmetic declaration procedures - a mandatory procedure before launching products on the market.
Another enterprise that imports foreign cosmetics for distribution also has to pay import tax. At the same time, carry out cosmetic announcement procedures.
Thus, whether manufacturing or importing and distributing, Vietnamese enterprises must pay all taxes and comply with licenses and conditions under Vietnamese law.
The paradox is that, for the same product, a foreign trader sells cross-border goods through e-commerce platforms, goods that are not subject to import tax, and also does not need to carry out cosmetic declaration procedures.
An "inequality" game takes place right at home: domestic enterprises are fully subject to tax and procedures, and cross-border goods are not subject to these obligations.
While domestic enterprises fully enjoy tax and inspection obligations, foreign goods are given preferential treatment without tax or procedures.
This is not an isolated case.
According to the Ministry of Industry and Trade, more than 1 billion USD of foreign goods flood into Vietnam every month through 4 major e-commerce platforms. Every day, about 4 - 5 million small orders are shipped from abroad to Vietnam, mainly low-value consumer goods.
Why is there a tax exemption?
The import tax exemption policy for small-value goods has been implemented for a long time.
The 1973 Kyoto Convention on harmonizing and simplifying customs procedures and the amended Protocol have required countries to stipulate the minimum value not collected for customs and other taxes. To fulfill this commitment, Vietnam has issued Decision 78/2010/QD-TTg on tax exemption for goods from VND 1 million or less.
The law on import-export tax also stipulates exemption from import-export tax for express-d like goods with a value of VND 1 million or less.
The above regulations stem from a simple principle: for small-value goods, the cost of collection can be much greater than the amount of tax that can be collected.
However, with the development of cross-border e-commerce, this policy has become no longer suitable. VND 27,700 billion is the total value of goods under VND 1 million imported through express delivery. Exemption from import tax not only causes budget losses but also creates injustice for domestic enterprises.
To collect taxes, we cannot use the old way!
The problem is not whether to "collect or not to collect", but what method to use to collect. Currently, the traditional customs system is based on HS codes consisting of 6-8 digits to classify each type of goods in detail. This system is suitable for large container imports with a stable portfolio.
But with e-commerce, each import shipment includes hundreds, thousands of products, all types with different codes. If the principle of cross-border e-commerce is applied, many problems will arise: difficulty in determining HS codes for each small order, and at the same time each trip has too many HS codes that need to be processed, leading to difficulties in customs clearance, causing delays in delivery, causing damage to both sellers and consumers.
The problem that needs to be solved is how to collect correctly, most effectively and at the least cost.
A model that can be learned is Canada. The country has implemented a simple customs classification system for e-commerce products since 2012. Accordingly, instead of requiring the determination of detailed HS codes, this country groups goods into " baskets" according to the application or industry, applying a fixed tax rate:
Corps 1: Clothes, shoes, textiles with a tax rate of 20%
Corps 2: Cosmetics, ceramics, kitchen appliances, plastic products... with a tax rate of 8%
basket 3: Electrical equipment, electronics, toys... and tax exemption
Thanks to this approach, Canada has reduced nearly 5,400 HS codes to only 3 main groups, helping to simplify the process, save administrative costs, and still collect enough taxes.
Cross-border e-commerce is a reality that we need to face. If we continue with the current policy, we will unintentionally create inequality with domestic enterprises, and cause loss of revenue for the State budget. It is time to change this policy, build an import tax system for e-commerce - simple, transparent, and can be implemented automatically.
