Zeroed tariffs challenge domestic business

16:02 | 23/02/2018 Finance - Banking

(VEN) - According to the Ministry of Finance, more than 16,200 tariff lines will be zeroed out in 2018 in accordance with more than 10 free trade agreements (FTAs). This will challenge domestic enterprises and force them to formulate and adopt specific plans and strategies to survive the competition and ensure their further development.

zeroed tariffs challenge domestic business

From cars to lemons

According to FTA commitments, a series of import tariffs to Vietnam have gradually been cut over several years, with the reduction accelerating since 2015. More than 16,200 tariff lines will be zeroed out in 2018 in accordance with more than 10 free trade agreements (FTAs), the Ministry of Finance said. Additional tariffs will be cancelled by 2022, leaving in place import taxes on alcohol, beer, petrol, cars, sugar, meat by-products, and cement from 2018 to 2022.

However, different FTAs apply different tax rates to the same item. For example, under the ASEAN (Association of Southeast Asian Nations) Trade in Goods Agreement (ATIGA), taxes on automobiles and auto parts sold to Vietnam are being abolished altogether starting in 2018, while the ASEAN-China FTA applies a 20-50 percent tax to passenger cars of all types.

Vietnamese exporters are also expected to encounter challenges, with import taxes on live animals and meat of all kinds to some countries, including India and the Republic of Korea (RoK), zeroing out by 2022, and those applied to live poultry, chicken meat, pork, rice, sugar, grapefruit, and lemon imports to ASEAN countries maintained at five percent between 2018 and 2022.

Challenges and opportunities

Pham Ngoc Hung, Deputy Chairman of the Ho Chi Minh City Union of Business Associations (HUBA), said while they challenge domestic businesses, FTA-based tax reductions will enable businesses to import materials at better prices and quality, which will in turn help them improve competitiveness.

Domestic enterprises should take the initiative in minimizing production costs, increase goods and service competitiveness, improve human resources quality and management and business administration, and connect with and join global supply chains, he said.

Relevant authorities should improve non-tariff barriers in general, and technical barriers in particular, in compliance with the World Trade Organization (WTO)’s requirements to ensure import standards and protect domestic production at the same time. They should also revise their thinking on policy making and administrative reform, and take the initiative in creating a favorable business environment.

While they challenge domestic businesses, FTA-based tax reductions will enable cheaper import of quality materials for production, helping them improve competitiveness.

Thanh Thanh