Removing import and export duty incentives is expected to level the playing field for local enterprises following the World Trade Organization’s accession path.
The Ministry of Finance (MoF) has proposed the reduction of import duty incentives for many groups of goods as well as the exclusion of many industries from the preferential investment list in a draft decree amending Decree No. 149/2005/ND-CP of December 8, 2005, guiding the Law on Import Duty and Export
Duty.
As per the draft paper, only parts, materials and raw materials that cannot be produced in Vietnam would be imported duty exempt. But this concession would no longer apply to projects on assembly and manufacture of cars and motorbikes, production of refrigerating electronic appliances and some other items decided by the Prime Minister.
Nguyen Van Phung, deputy director of the MoF’s Tax Policy Department, said that the removal of incentives would hardly have any effect on enterprises’ business activities because the current preferential tax rates were low. “When we drafted Decree No. 149/2005/ND-CP, duty rates applicable to most imported items were high, therefore tax incentives enabled local enterprises to expand their business activities. However, as we began implementing our WTO commitments, we cut many import duty rates. Currently, most preferential items are taxed at a rate of 1-5 per cent, so the incentives no longer have any effect,” he said.
However, addressing at a recent meeting organized by the MoF to gather comments on the draft, experts suggested that the Government make its regulations more specific to avoid misunderstandings that cost time and money. For example, while the draft decree states that providing public transport services using ships, planes, trains and modern and high-speed means of transport would be eligible for investment incentives, there was no specific definition of “modern” and “high-speed”.-