Cheap foreign goods flood into Vietnam thanks to tax exemption

Foreign-made goods worth tens of thousands or hundreds of thousands of dong are flooding e-commerce platforms and are ready to be delivered to consumers in a short time, and have become popular in Vietnam.

Sitting in Vietnam buying cheap foreign goods

Buying things from all over the world and having them delivered to your home is no longer a strange thing for young people in big cities like Ho Chi Minh City, Hanoi...

Through e-commerce platforms, buying foreign goods has the same shipping cost as buying domestic goods . Photo: Ngoc Thang

On Lazada, there is a Lazada-Global section or on Shopee, there is a "Hunting for international deals" section with countless different products from clothes, shoes, cosmetics, backpacks, handbags, technology accessories such as phone cases, headphones, fast chargers... with prices of only a few tens of thousands of VND or more. Try Shopee, a box of blush stick costs 79,000 VND and clearly states that it is shipped from abroad. Similarly, searching for a pair of sneakers priced at more than 300,000 VND on Lazada Global also shows many different products, clearly stating that they are shipped from abroad with a normal fee of only 17,000 VND, buyers can pay upon receipt... In general, the payment terms and shipping fees of products ordered directly from abroad through the above platforms are no different from those sold by individuals and organizations in the country, and are often even cheaper. Sharing more about this, Le Vien (a young person living in Ho Chi Minh City) said that not only e-commerce platforms, but also many official websites sell and deliver goods in Vietnam. In particular, many websites advertise products in Vietnamese to help buyers easily choose such as taobao....vn, aliex....com, global.j...com... Delivering goods to buyers, with shipping fees similar to domestic purchases, is done through express delivery units. "Before, I was afraid that buying goods from abroad would have very expensive shipping fees or too high prices, but now I see it as normal. The seller's business is their business, I don't know because I only pay when I receive the goods, I see a reasonable price and the product is exactly as the picture, I buy it. And if I order international goods on the platforms, it will only take more than a week, not too long, up to a month like ordering through international order receiving houses", Le Vien said. Asking why foreign goods are still cheaper than domestic goods in Vietnam, KV, a representative of a service specializing in receiving international orders in Ho Chi Minh City, said that cheap goods are flooding the internet, especially those originating from China or some countries in the region. If you receive orders like KV, the shipping unit will usually concentrate on many orders, then bring them to Vietnam in containers, so the fee is low. Customs clearance and delivery procedures are also handled by the shipping side. However, the biggest difference here is that if a normal order takes 4 weeks or more to reach customers in Vietnam, when buying through e-commerce platforms, it only takes 7-10 days. KV said that maybe the warehouses are concentrated near the Vietnamese border, retailers have pre-consigned goods and when there is an order, they ship it immediately, so it doesn't take much time.

Tax exemption loophole for goods under 1 million VND

The National Assembly Standing Committee has mentioned the influx of low-value goods from abroad into Vietnam in recent meetings. The reason is that imported goods with a value of less than 1 million VND sent via express delivery services are exempt from import tax and value added tax (VAT) at the import stage according to Decision No. 78/2010. This has affected the effectiveness of VAT collection, especially for transactions of buying and selling these goods through digital platforms and e-commerce trading floors. The National Assembly's Finance and Budget Committee stated that previously, VAT exemption for imported goods with small value was based on the fact that the amount of tax collected was insignificant compared to the collection management costs of customs authorities and the compliance costs of taxpayers. However, with the current boom of e-commerce, the general trend of many countries shows that the amount of cross-border transactions of small-value goods has increased many times in recent times. According to data from the Vietnam Posts and Telecommunications Corporation, as of March 2023, an average of 4 - 5 million orders/day were shipped from China to Vietnam. With the value of each order divided into small parts from 100,000 - 300,000 VND; on average, about 45 - 63 million USD per day, about 1.3 - 1.9 billion USD worth of goods are circulated through Shopee, Lazada, Tiki, TikTok Shop... The current VAT Law and the draft amended law do not stipulate VAT exemption for imported goods of small value. Therefore, the above agency recommends that the Ministry of Finance, when issuing the Decree on customs management of exported and imported goods traded via e-commerce, ensure the termination of the validity of the VAT exemption regulations for imported goods of small value in Decision No. 78/2010 to be able to expand and cover revenue sources, in accordance with international practice. This will increase VAT revenue from e-commerce business activities for goods. Agreeing with the above opinion, trade expert Vu Vinh Phu said that VAT exemption for goods valued under 1 million VND is no longer suitable when e-commerce is increasingly booming. Individuals and organizations will take advantage of this policy and quickly ship goods to domestic buyers. Foreign goods are already cheap and exempt from VAT, making Vietnamese goods even less competitive. Therefore, Mr. Phu said that it is time to immediately remove the above regulation and apply VAT rates to imported goods as usual for domestic goods. However, Mr. Phu also noted that Vietnamese goods must upgrade themselves, such as having diverse designs, quality and safe products, and businesses must build brands, link together from manufacturers to distributors to bring goods to consumers at low cost. In addition, state management agencies, in addition to checking and controlling the quality of goods, preventing fraudulent acts, etc., must also upgrade traditional markets and support Vietnamese goods to be widely distributed to remote areas in order to compete with cheap foreign goods. Lawyer Tran Xoa, a tax expert, analyzed: Import tax in 2016 stipulates that goods with a value or tax amount payable below the minimum level. Then, Decree No. 134/2016 of the Government stipulates that imported goods sent via express delivery service with a customs value of VND 1 million or less or with a tax amount payable below VND 100,000 are exempt from tax. Thus, previously, goods under the threshold of VND 1 million were exempt from VAT and import tax as stipulated in Decision No. 78/2010 and Decree No. 134/2016. Importantly, many countries have now abolished the VAT exemption for small-value imports to protect revenue sources and create an equal business environment between domestic production and imports. Therefore, it is only necessary to abolish Decision No. 78/2010 and amend Clause 2, Article 29 of Decree No. 134/2016 without having to stipulate it in law.

Regulations are no longer relevant

Previously, when the Government issued regulations exempting VAT or import tax for small-value goods, it was appropriate. But now, goods are getting cheaper, with 1 million VND you can buy many different products. Along with the development of e-commerce, modern logistics... this regulation is no longer appropriate, being taken advantage of by many individuals and organizations, causing tax losses and being unfair to domestically produced goods. Many countries have also abolished this regulation, so Vietnam considers it appropriate to abolish it.

Lawyer Tran Xoa/ Thanhnien.vn

Source: https://thanhnien.vn/hang-ngoai-gia-re-tran-vao-vn-nho-mien-thue-185240924215819811.htm