Keywords: free trade agreement, fighting against loss of state budget.

1. Current status of state budget collection in 2017 and early 2018

The State budget is an annual estimate of all financial sources mobilized for the State and use of such sources in order to ensure implementing functions of the State as specified in the Constitution. It is the most important concentrated financial source in the national financial system. Additionally, the State budget is the financial potential, strength of the State. The management and operation of the state budget exerts a direct impact on other activities in the economy.

Right in the early days of 2018, the Government issued Resolution No. 01/NQ-CP on major tasks and solutions to implement the socio-economic development plan and state budget estimate of the year, including many tasks associated to the role of Customs agencies. As a guardian unit of the economy, over the past years, the Customs sector has implemented such regular tasks as state budget collection, anti-smuggling and fighting against trade frauds. In order to properly implement these tasks, Customs agencies have made great efforts in coordinating and urging relevant ministries and branches to deploy activities directly contributing to the reduction of administrative procedures, modernization reform, development of an e-government, facilitating customs clearance for goods at border areas.

In overview, the socio-economy of Vietnam in 2017 developed under the context of positive signals in the world economy with the recovery and stable growth of major economies such as China, America, Japan, Korea, European Union. In 2017, thanks to the efforts made by the whole political system, all levels, branches, enterprise community and people in the whole country under the leadership of the Party, our country’s socio-economic situation has positively, comprehensively changed, reaching and surpassing all 13/13 planned targets. Although the year of 2017 is the year with import taxes continuously reduced in large amount by free trade agreements (FTA) especially those with high turnover, tariffs and large revenue; incidents of flood and natural disaster continuously occurred in 2017 also caused negative impacts on customs revenue. However, under the drastic direction of the leaders from the Ministry of Finance, leaders of the General Department of Vietnam Customs and the efforts, determination of officials, public servants, labours in all units of the Sector, the State budget revenue in 2017 reached 104.24% of the estimate.

In 2018, the revenue estimate assigned to the General Department of Vietnam Customs under Decision No. 2465/QD-BTC dated 29 November 2017 is VND 283,000 billion, in the context that the world economic situation in 2018 is forecasted to continue on its momentum growth recovery, however, there are still many challenges, difficulties facing, import tariffs under FTAs during the period is sharply cut (over 90% of goods categories under the ASEAN Trade in Goods Agreement (ATIGA) shall be reduced in import tax rate to 0%). At the Conference of Reviewing works in 2017, Implementing tasks in 2018, receiving the guidance from the Minister of Finance, General Department of Vietnam Customs strives to collect VND 293,000 billion for the state budget in 2018.

Total state budget revenue in the first 6 months of 2018 was VND 145,934 billion, reaching 51.57% of the estimate, 49.8% of the target, increasing by 2% over the same period of 2017. Of which, the amount from imported petrol and oil accounted for 13%.

The reason for increasing in revenue of the first 6 months of this year was mainly the increase in both volume and value of imported gasoline and petroleum in the first months of 2018. However, the revenue from gasoline and petroleum in the last months year will not be stable, is expected to sharply decrease because Nghi Son Refinery Petrochemical Limited Liability Company’s plant produced commercial products. On the other hand, 2018 is the year with the strongest effect ever since all FTAs have reached their period of deep reduction, particularly for ATIGA (over 90%) most of goods have import tariff reduced to 0%. 

2. Major solutions to fight against loss of state budget revenue in new context

a) Closely following up instructions of the Government on developing task of collecting state budget

All levels and the Financial sector should continue effectively implementing Resolution No. 01/NQ-CP dated 1 January 2018 on major tasks and solutions to direct, manage the implementation of the socio-economic development plan and State budget estimates in 2018 and the Government’s Resolution No. 19-2018/NQ-CP dated 15 May 2018 on continuously performing major tasks and solutions to improve the business environment, national competitiveness in 2018 and the coming years; Resolution No. 23/NQ-CP dated 8 April 2018 on measures to manage the implementation of socio-economic development plan and state budget estimates in 2018.

The tasks assigned in Directive No. 555/CT-TCHQ dated 26 January 2018 of the General Director of General Department of Vietnam Customs are continued to implement in order to complete the target of SB collection for 2018 of the Sector assigned by the Ministry of Finance with the amount of VND 293,000 billion.

b, Reforming administrative procedures, creating maximum convenient conditions for enterprises to participate in import and export activities

All levels and branches should concentrate on timely solving difficulties and problems for enterprises, quickly and favourably handling administrative procedures for organizations and individuals in Resolution No. 19/NQ-CP dated 12 March 2015 of the Government on major tasks and solutions to improve the business environment and national competitiveness. Solutions on policy should be studied and proposed in order to minimize the time for customs clearance of goods, create favourable conditions for import and export, increase the State budget revenue; mitigate the use of policy loopholes to make profits of enterprises, ensure the effective prevention of smuggling, trade frauds and fake goods, avoiding loss of state budget revenue.

Continue to maintain the Fast-handling team and take initiative in meeting and timely handling problems under its competence related to customs procedures, tax policies, tax management, accounting regimes and regimes of tax reimbursement, tax exemption and removal of difficulties in order to create favourable conditions for enterprises in tax payment, timely deal with problems related to tax policies and regimes which affect the management of state budget collection and payment.

Favourable conditions are created for enterprises in tax payment in accordance with the Ministry of Finance’s Circular No. 126/2014/TT-BTC dated 28 August 2014. The connection with Commercial banks is continued to expedite and expand to maximumly facilitate the tax collection and payment, complete the performance and expansion of electronic payment portal, upgrade the system using electromagnetic list with digital signatures, upgrade the information exchange system with Commercial banks and the State Treasuries. Up to now, the General Department of Vietnam Customs has signed cooperation agreements in SB collection with 27 commercial banks with the collected amount accounting for 63.5% of the total revenue.

The reform of Customs procedures, tax management procedures, modernize customs procedures is promoted, difficulties of enterprises are shared through enterprise conferences, practically contributing to the improvement of business environment, national competitiveness in implementing targets set in the Government’s Resolutions.

 Propagandizing and providing legal consultancy on customs for the enterprise community and citizens is promoted to improve compliance in tax law enforcement.

In order to achieve targets of the Government’s Resolution No. 19(1) on shortening the time required to complete import and export procedures of enterprises to the average level of ASEAN-6 countries, reform of tax collection and payment procedures should be strengthened.

In order to continue implementing administrative procedure reform in the field of SB collection between the State Treasury, collecting agencies and commercial banks; The General Department of Vietnam Customs submitted to the Ministry Circular No. 184/2015/TT-BTC dated 17 November 2015 for approval to replace Circular No. 126/2014/TT-BTC in accordance with principles of the revised Law on Customs, making e-declaration, electronic tax payment via internet. Accordingly, when the Circular is issued, it will cause concrete impacts that: 

Taxpayers shall be able to make payment at home or anywhere, they shall be able to declare payment at any time through the bank’s electronic transaction channel when connected to the Internet without having to go to transaction point, reducing the cost for enterprises, number of administrative procedure. The formation of payment records shall be supported by the customs e-portal to ensure accurate information prior to providing to the collecting agency.

Where taxpayers use shared electronic guarantee, they shall be proactive in arranging time for completing customs procedures, fulfilling their tax obligations at anytime and anywhere, regardless of holidays or public holidays that banks does not work. Immediately after the bank’s transferring information of electronic tax guarantee, taxpayers shall promptly open customs declaration, minimizing the time for customs procedure clearance and tax payment.

Customs agencies shall be able to use the tax-guarantee information through e-customs payment portal instead of the tax guarantee letter in writing.

The collection and payment of charges from Ministries and branches participating in the national one-stop-shop mechanism shall be implemented in order to significantly minimize the time for goods clearance of enterprises instead of going to each relevant functional agency to pay charges for their import and export goods as before.

The General Department of Vietnam Customs developed a system of valued added tax (VAT) reimbursement information management for goods purchased by foreigners in Vietnam upon departure when leaving the country in order to serve the purpose of electronic reimbursing VAT on goods purchased by foreigners in Vietnam when leaving the country under Circular No. 72/2014/TT-BTC of the Ministry of Finance regulating on VAT reimbursement for goods taken along foreigners and overseas Vietnamese upon departure out of our country.

The procedures for electronic tax exemption, reduction, reimbursement, non-collection, reduction consideration shall comply with the guidance in the Ministry of Finance’s Circular No. 38/2015/TT-BTC dated 25 March 2015 regulating on customs procedures; customs inspection and supervision; export, import taxes and tax management for export and import goods with the target that taxpayers send data to customs agencies, the agencies receive and process the data through their system and perform professional operations on the data system of customs agencies with the State Treasury, tax authorities and other relevant agencies.

It is necessary to further simplify 11 administrative procedures related to border management in the entry and exit procedures at seaport and inland border gates within the management of the Ministry of Finance.

c) Continuing to reform taxation policy and management system including:

- Not to reduce excise tax on passenger cars of all kinds including pickup vehicles because their exporter to Vietnam such as Korea, Russia, ASEAN countries, EU, etc., are countries that are eligible for import tax reduction under FTAs

- Recommend functional agencies to urgently study, develop and issue technical barriers to prevent the rampant import of some goods in very low tariffs, especially goods nearing expiration date for foods, cosmetics and pharmaceuticals that are freely imported in current period in countries, if goods have expiry date left less than 6 months, they shall not be imported or examined very harshly in case of being allowed to import because their prices are very cheap, unable to collect much import tax due to the low import price while they cannot be applied with anti-dumping tax because of the fact that import prices are real prices with severe competition for domestic goods and influence to the health, safety of people’s lives and society.

- Review the preferential policy on tax exemption for imports of export processing enterprises located outside the export processing zones because actually, it is very difficult to manage the goods of the enterprises in the exchange with domestic market.

-  Promptly promulgate Special preferential import tariffs of such countries which have signed free trade agreements with Vietnam as Korea, Eurasian Economic Union (Russia - Belarus - Kazakhstan) so that the General Department of Vietnam Customs can provide measures to strengthen the management of tax on goods imported and exported from these markets.

- Develop consistent regulations to tax policies on import goods for the production of export goods and import goods for processing to foreign countries in the orientation of applying the tax-exemption regime as applied for import goods for processing in order to overcome current shortcomings.

- Uniform name and code number of goods between the Category of Vietnam’s export and import goods with tariffs on import and export goods and the Category of specialized import and export goods; revise documents on classification of goods, ensure publicity, transparency, simplicity, easy for implementation; standardize specific explanation of HS and officially public this document on the website of the General Department of Vietnam Customs for reference material in goods classification.

 - Amend preferential import tax rates in the orientation of: reducing the number of tax rate levels; raw material tax rate shall be lower than or equal to that of finished product, component tax rate shall be lower than or equal to that of an unit; ensure selective, conditional and terminable protection based on competitive advantages of each goods item, goods type contributing to the investment orientation and complying with the international treaties of which Vietnam is a member. For goods of the same nature and use, a same tax rate shall be applied. In case of protecting any domestic production, there must be criteria to distinguish it. Appropriate roadmaps and progresses should be developed for each goods line, competitive advantage, demand, domestic production capacity.

- Develop and promulgate risk management procedures and category of export and import goods; promote and improve the efficiency of collecting and processing information, regulations on exchange and providing information with the General Department of Taxation on the Risk criteria set for identifying key enterprises and uniformly apply enterprise management mechanisms.

- Amend the Environmental Tax Law and its guiding documents to facilitate the implementation, thus contributing to reducing management costs and limiting tax revenue losses, such as: clearly regulating that petroleum and gasoline subjected to tax shall be imported petroleum and gasoline, regardless of whether fossil fuels or not, as this is very complex; clearly regulating that imported goods shall be subject to payment of environmental protection tax to customs agencies.

 - Amend a number of articles in the Tax Management Law and its guiding documents in order to improve the effectiveness of tax management and fighting SB revenue loss, for example, amending regulations on debt relief of tax and fines at Article 65 of the Tax Management Law in the view of applying measures of debt forgiving and rescheduling in case of bad debts, hard-to-be-recovered debts.

 - Determine the implementation plan in specific manner. Particularly, first of all, it is necessary to closely coordinate with relevant agencies in early detecting fraud cases of origins, value and codes (Vietnam Chamber of Commerce and Industry; Vietnam Competition Authority, the Ministry of Industry and Trade; Foreign Investment Agency, the Ministry of Planning and Investment; the Ministry of Public Security, the Price Management Department, etc.,). Determine the focus of export goods showing signs of unusually large turnover at each time in order to request for tracking the origin of goods. At the same time, the implementation of risk management solutions should be synchronously deployed, particularly focusing on key issues such as: Reviewing and analyzing the import and export activities of enterprises, focusing on key enterprises, enterprises with high risks in importing goods which are finished products in the form of disassembled components or semi-finished products for fraudulent payment of payable tax amounts or enterprises showing signs of illegal export for VAT reimbursement; improving the quality of enterprise compliance assessment; completing mechanisms for collecting and managing enterprise dossier information; improving the quality of customs inspection to ensure the quantity and percentage of goods lots to be channeled, checking the documents, implementing actual inspection for goods in appropriate manner to the actual resources at each Customs sub-department, etc.

Thus, for the above-mentioned solutions to become effective, the General Department of Vietnam Customs should always closely monitor and analyze the situation of SB collection and payment to direct Provincial/ City Customs Departments to organize to check the whole sources of collection, timely detect areas, fields, items, business types failed in SB collection, then appropriate management measures shall be come up with n

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(1) Resolution No.19/NQ-CP sets out the target of simplifying procedures, dossiers, records and procedures for export, customs procedures and shortening the time for customs clearance of export and import goods; shortening the time for enterprises to complete procedures for export to 14 days, import to 13 days, equal to the average period of ASEAN-6 countries.

l References:

1. Nguyen Thi Thanh: Concept, characteristic and role of the state budget, article on website of trithuccongdong.net

2. Resolution No. 01/NQ-CP dated 1 January 2018, Resolution No. 23/NQ-CP dated 8 April 2018 of the Government.

3. LucDe Wulf and José B. Sokol, study materials on “Customs modernization experiences of some countries”.

4. K B Brady, WCO, “Revenue Package” (June 2012).

Ma. NGUYEN THI DIEU HOA

General Department of Vietnam Customs