Monday, 18 Dec 2017

Vietnam to lose US$4.85 billion in next three years following tariff exemption

Updated at Friday, 01 Dec 2017, 20:28
The Hanoitimes - Vietnam’s state budget may lose more than VND110 trillion (US$4.85 billion) in the next three years in the wake of free trade mechanisms and elimination of multiple tariff barriers under signed free trade agreements (FTAs), the Ministry of Finance (MoF) estimated.
According to the estimate, with 10 new generation bilateral and multilateral free trade agreements (FTAs), the country’s state budget may lose VND30.150 trillion in 2018, VND36.340 trillion in 2019 and VND43.965 trillion in 2020.
Next year will be an important transitional year of the elimination of tariff barriers for many commodities imported from ASEAN countries, as over 90 percent of the goods under the ASEAN trade agreement (ATIGA) will bear 0 percent tariff. The strongest tax reduction is applied to some items with large tax revenues such as auto (30 percent to 0 percent), components and spare parts (5 percent, 20 percent to 0 percent), steel (5 percent to 0 percent), and agricultural products, tobacco, and alcohol.
Vietnam will eliminate tariff barriers for many goods imported from ASEAN countries in 2018.
Vietnam will eliminate tariff barriers for many goods imported from ASEAN countries in 2018.
In addition, with the signing of ASEAN-China trade agreements (ACFTA), and ASEAN-South Korea trade agreements (AKFTA), over 400 commodity lines with current tariffs of 5 percent, 7 percent, and 10 percent will be 0 percent in 2018. These two countries are the current largest exporters to Vietnam.
According to statistics of the General Department of Customs, Vietnam records very large import turnover from three main partners, including China, South Korea, and ASEAN countries. The import turnover from China has been improved in the direction of reducing the proportion in import value and trade deficit ratio.
However, in replace for the reduction of import turnover with China, Vietnam has raised imports from South Korea and ASEAN countries. The trade deficit ratios at these markets have also increased. The main goods Vietnam imports from South Korea include machinery, electronic components, and automobiles; while main goods imported from ASEAN countries are machinery, construction materials, consumer goods, automobiles and automobile components, and electronics.
According to the MoF, Vietnam has signed 10 FTAs. The implementation of commitments on tariffs aims to attract and contributes to increase foreign investment and cut costs, while helping increase state budget revenues from domestic taxes such as corporate income tax, land tax, value added tax, and personal income tax.
In the immediate future, the implementation of FTA commitments will lead to a fall in revenue from import tariffs, affecting the overall state budget revenue. This puts great pressure on the structure of budget spending, in particular new tax revenues may arise, increasing the burden on domestic sectors if it is not controlled.
The 10 FTAs that Vietnam has joint include ASEAN, ASEAN - China, ASEAN - South Korea, ASEAN - Australia - New Zealand, ASEAN - India, ASEAN - Japan, Vietnam - Japan, Vietnam - Chile, Vietnam - South Korea, and Vietnam - Eurasia Economic Coalition.
In the coming time, Vietnam may deeply participate in some new generation and interregional FTAs such as the RCEP Regional Comprehensive Economic Partnership and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP) with 11 old TPP members, except the US.
​Anh Hong
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