* Higher localization rate crucial for foreign investment attraction: According to a survey by Japan External Trade Organization (JETRO), the localization rate of
JETRO executive director Yasuzumi Hirotaka suggested at a seminar held on September 19 in Ho Chi Minh City that the Vietnamese State should introduce support policies to help increase local content ratios for raw materials and parts, and Vietnamese businesses should regard the supply of locally produced raw materials and parts as a survival matter since this would be a decisive factor in retaining and attracting foreign investors.
Although foreign firms are eager to find long-term investment opportunities in
Because it is expected that Japanese and other foreign businesses will gradually move their factories and distribution systems from China and Thailand to Vietnam, Indonesia and the Philippines for cheaper labor and raw material costs, support policies should be issued by the Government to improve the quality of human resources and availability of localized materials and tax laws should be kept stable and clear, Hirotaka said.
* Tax transfer pricing frauds to be tackled: The country is piloting an advance pricing agreement (APA) to deal with transfer pricing, the trick of misrepresenting tax bands to avoid paying extra, an official of the Ministry of Finance (MOF) confirmed.
The APA is intended to avoid future transfer pricing disputes by entering parties into a five-year fixed agreement on their tax band. Tax payers may join APAs with more than one tax authority, i.e. bilateral or multilateral APAs, through the mutual agreement procedure (MAP) included in most income tax treaties.
Unilateral APAs involve agreements between the taxpayer and one authority.
Pilot participants include foreign-invested businesses, which will declare their costs, prices and projected profits in
MOF also released a draft circular advising on the application of the APA in tax administration.
In another move to avoid tax fraud, the amended Tax Administration Law regulated that though frauds can be handled up to five years from the date of commission, violating taxpayers must pay full amounts owed if their frauds were committed in the past 10 years and tax authorities can inspect any suspected tax fraud cases from the past 10 years.
* Zero export duty for steel scrap proposed: The Ministry of Industry and Trade (MOIT) has proposed to remove entirely the 15-percent duty rate imposed on export stainless steel scrap, with a view to easing the financial burden on domestic manufacturers.
The MOF has recently proposed the Government to consider offering a zero duty rate for one of the country’s leading stainless steel manufactures, Posco VST Company, in response to the company plea for an incentive to keep the cost of exporting the metal waste a viable option.
Stainless steel scrap is exported to other countries to be refined because there is no steel furnace in the country. This reprocessed steel would be imported back into the country for use in domestic manufacturing.
The export of stainless steel does not impact the country’s natural resources and minerals because the scrap originated from imported raw stainless steel products in first place.
The MOIT said that the export duty should be removed altogether based on Decree No. 87/2010/ND-CP of August 13, 2010, guiding the Law on Import Duty and Export Duty.
* Environmental protection tax on unused plastic bags to be retrospectively collected: The MOF has requested tax and customs offices to retrospectively collect environmental protection tax on plastic bags which have been imported for packaging taxpayers’ products but remain unused or are not yet used up and intended for exchange, internal consumption or donation.
Importing taxpayers will have to declare and pay environmental protection tax for such imported plastic bags, including torn, ragged or irreparable damaged ones.
Environmental protection tax will be declared and paid at customs offices for plastic bags imported as raw materials or supplies for export production or processing.
For plastic bags imported for trading in the country but left unused or not used up, importers are required to declare and pay environmental protection tax at tax offices in localities where they are headquartered.
* Regulatory obstacles to business bankruptcy identified for removal: The provisions of the 2004 Law on Business Bankruptcy on mechanisms, procedures and teams responsible for liquidation of assets of businesses falling into bankruptcy, settlement of security assets, especially land use rights, and debts (both receivable and payable) have long been considered the main reasons for the prolonged process of bankruptcy declaration for insolvent businesses.
Concerning the team for asset liquidation, legal experts suggest learning from the experiences of developed countries in assigning the whole task of asset liquidation to an individual asset manager, instead of a managing collective, who can be much more flexible and quick in making decisions, though they still have to consult professional price appraisers in evaluating assets of bankrupt businesses based on the Pricing Law (effective as of January 1, 2013).
They suggest that the Business Bankruptcy Law should divide assets into different kinds subject to different methods of sale, not just public auction, in order to facilitate quick and effective disposal of assets; and allow courts to issue bankruptcy declaration decisions even when some debts remain uncollected.
The collection of debts will be further carried out by judgment enforcement agencies under court decisions and those debts will be proportioned to debtors under initial asset division decisions.
* Private businesses require greater state involvement in public-private partnership: In order to make private investors in pilot public-private partnership (PPP) interested in and feel secured about their investment in infrastructure projects, especially highly capitalized ones, legal experts propose a more flexible private contribution ratio as well as state guarantee for private capital from bank loans.
Regarding proposed amendments to Decision No. 71/2010/QD-TTg, they agree that the current state capital contribution ratio of 30 percent is reasonable. However, the State should not limit its participation in the PPP project preparation and should pay partially service charges to private investors when projects are commissioned so as to have interests and right to control operation of these projects.
Priority should be given to investors that take the initiative in proposing projects and project implementation mechanisms over those selected through bidding for projects on the State’s list.
Only investors that propose projects will be required to make feasibility study reports, while responsible state agencies will conduct feasibility study for projects designated by the State.
There should be a sole specialized agency in charge of monitoring projects implemented under the PPP mechanism, the experts said.
* Asset Management Company to issue bonds to offset non-performing loans: The Vietnam Asset Management Company (VAMC) plans to issue VND 35 trillion (USD 1.67 billion) worth of bonds to purchase non-performing loans (NPL) from credit institutions this year, said the VAMC vice chairman Le Quoc Hung.
VAMC will soon submit its plan to the State Bank of Vietnam (SBV) for approval.
A VAMC bond will be equivalent to a contract purchasing and selling NPL. In case NPL is a syndicated loan, VAMC will issue a bond for every credit institution taking part in the loan.
The value of bonds will be equal to the NPL’s purchase price at book value. The bonds can be deposited at SBV free of charge.
With the refinancing rate to credit institutions as high as 70 percent of the price of bonds issued by VAMC during the NPL settlement process and an annual provision of 20 percent for the bonds issued by credit institutions, VAMC is expected to attract many banks to sell their NPL.-