Reinforcing the prevention of commercial frauds via the tax coding

Reinforcing the prevention of commercial frauds via the tax coding 20/08/2011 10:52:00 1311

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Since Vietnam’s integration into international economy, the authorities have been working to find out the most effective solutions for anti-commercial fraud through pricing. Survey results from customs sector show that there are complicated forms of commercial frauds. The most obvious is the wrong declaration of the actual goods, the tax rate, the imports’ type and value.


Prevention against the under-price declaration


To implement Decree No 11 of the government, the ministries and branches have many solutions to minimize trade deficit and improve the techinicall barrier to prevent the products which are not encouraged to import. In April and May of 2011, the Ministry of Industry and Trade issued Circular No 20/2011/TT-BCT supplementing the procedure to import passenger cars (less than 09 pasengers) and Notice No. 197/TB-BCT on the import of wine, mobile phones, and cosmetics. Simultaneously, The General Department Customs issued decision to add 07 items in the List of Risk Management, and decision to reinforce management on import prices which were effective from 01/06/2011.


According to Mr. Luu Manh Tuong, Deputy Director of the Import-Export Tax Department (The General Department Customs), the prices of the items in the List of Risk Management were decided basing on the information from businesses and customs offices processed in a procedure regulated by legal documents about taxed pricing or information from manufacturers and associations. Among the 7 items added to the list were automobiles and motorbikes which were suitable with the actual trading at the moment. The customs sector used the risk management methods to prevent the fact that businesses declared the lower price to get tax evasion.


In fact, in 2004, the Customs department firstly announced the list of 23 importers who had to pay arrears of millions of VND due to lower declaration of prices. Until the end of 2007, the customs offices transferred all the profiles of suspected businesses to the police department.


According to the Customs Department, in the implementation of Notice No 197 of the Ministry of Industry and Trade recently issued, at the border customs in HCM city, businesses tried to find loopholes. Instead of importing CBU mobile phones, they now imported components to assembly later in the country.


HCM City Customs Department said that this happened at Tan Son Nhat customs office. After checking, the components imported by businesses were just ‘disassembled mobile phones”. Thus, the businesses must follow the regulations in Notice No 197 of the Ministry of Industry and Trade. HCM City Customs requested the General Department of Customs to apply strict measures to important components: customs officials would check the individual components like: the fronst, bodies, batteries, charger, earphones, containers etc.


Pressure on the management of imported activities


The prevention of commercial frauds via the imposition of tax rate is an activity which puts a lot of pressure on the customs sector. Practically, when the businesses declare the tax rate, they always try to make it the lowest by: wrong name of the commodity, wrong functions, from CBU to CKD or SKD etc.


However, the classification of commodities is very complicated with a lot of difficulties. In some situations, the classification of relevant authorities is arguable, leading to legap proceedings between the customs and businesses.


The reason for this partly comes from the fact that new items appear more and more with many varieties, brands, and functions.


Beside, one important reason is the insynchronization of guiding documents and legal procedures. The GATT/WTO (General Agreement on Tariffs and Trade/World trade Organization) has been applied in Vietnamfor a short time (since 2004), so there is not enough experience on policy planning and Vietnam is still passive in the field.


According to Mr. Bui Thai Quang, Deputy Chief of the Administerial Office -  General Department of Customs, to effectively prevent the trade deficit, the standards in the mechanical barrier issued by different ministries and branches should be practical and feasible. This will reduce the pressure on the customs sector when dealing with businesses’ rights.