Business Beat
The Government has had enough. Almost 150 tax refund frauds have been unearthed and they have cost the State’s coffers some VND480 billion US$3.2 million. It came as no surprise therefore, when last week, it decided to lower the refund rate businesses can claim, for purchases without official invoices, to 1 per cent right from October onwards.Earlier, companies could buy commodities, mostly agricultural, from farmers or small traders who did not issue formal receipts, and make a self-declared list of purchases. With this – often bogus – document, they could then get a 2-3 per cent refund of value added tax.
Tax officials have warned they would seek National Assembly approval to scrap such refunds altogether from as early as next year. Other measures they are mulling include a requirement that business deals should be transacted through banks to be eligible for tax refunds.
one group that will not find this funny are exporters, who source their materials chiefly from small traders. Manufacturers who rely on farm inputs, like sugar mills, are also bracing for higher production costs.
However, even tax officials admit that merely changing tax regulations would not stop these frauds. Most of the bogus refund claims involved genuine value added receipts. Con men set up companies solely for issuing genuine invoices, after issuing which, for bogus sales, they disappeared.
The crying need is for tax changes to be accompanied by co-ordination among various agencies, especially customs, before such refund frauds are reigned in.
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Motorbike retailers throughout the country are facing a particularly ticklish problem: each province and city has issued a ‘minimum price’ list for each brand. The catch? These lists have not been updated in spite of plunging market prices with the result, actual prices are usually much lower than in them. The purpose behind having these lists – to thwart tax evasion – is now working with a vengeance. While it was originally prompted by buyers and sellers conniving to invoice bikes at much lower than actual rates to lessen tax, they now face charges of tax evasion if they bill at exactly the right price!
A Super Dream from Honda now costs VND19.99 million but in the HCM City price list, it carries a tag of VND26.7 million. A Chinese-made motorbike may cost just VND 6 million, but the price list has it at at least VND10 million.
Even more hilariously, each city has its own price list, that a VND10-million bike in HCM City could be VND6 million in Da Nang and VND 7 million in Can Tho.
Now, if sellers do not conform to these prices, they are likely to come up against tax penalties, but if they do, they will have to pay tax on income they do not really earn, while customers have to pay a high value added tax.
This strange requirement could add to corruption at State departments, people fear. A car could cost just VND500 million while the list could have it down as VND600 million. It is easy to understand the temptation an employee would have to pocket the difference, claiming the invoice price to be real.
Tax officials however, are not willing to throw the baby out with the bath water. All they are ready to accept is a 5 per cent variation on the price lists, soon after provinces and cities update them.
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Agronomists with expertise in shrimp breeding are having a whale of a time. They are in huge demand from farmers wanting to hire them to look after their shrimp ponds for 10 per cent of the profits.
one such expert earned VND120 million after four months, when the shrimp crop yielded VND1.2 billion for the farmer, an average income of one million dong a day, an astronomical amount compared to the salary from his main job.
However, this is a win-win partnership for both scientists and farmers and remuneration for the former could be in several ways – one could sign a contract for a 50 per cent share of the output he helps increase; or for a monthly salary plus 5-7 per cent of the profits
It is no surprise, in the event, to see a young university graduate becoming rich after several shrimp crops, and driving his own car to inspect ponds.
This process could also soon cause a shakeout, creating star engineers, who are sought after, and mediocre ones who have to be satisfied with what contract they can get.
However, the need for good experts to work with farmers is huge and maybe this strong incentive will give a strong boost to the training of agronomists that no national programme can.
VNS
