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Vietnam vows to stop coffee tax frauds

The Ministry of Finance has requested local taxation bodies to strengthen the verification over the tax declaration, the move aiming to stop the tax frauds committed by a lot of coffee companies recently as warned by international and domestic organizations.

coffee tax frauds, coffee, ministry of finance

The European Coffee Federation ECF, which represents a high number of coffee companies, including Volcafe Ltd and Louis Dreyfus Commodities SA, has requested the Vietnamese administration to take investigations over the tax frauds in coffee trade before the new crop begins, Bloomberg reported on July 31.

Roel Vaessen, ECF’s Secretary General, has confirmed via telephone that on July 26, the Netherlands based Rijswijk Group sent letters to the Vietnamese administration levels, including the Prime Minister’s Office, the Ministries of Finance and Agriculture and Rural Development, complaining that the VAT frauds have led to the decreased amount of the certified sustainable-production coffee.

It happened that some enterprises which bought coffee at high prices stated that they bought coffee for export, but in fact, they resold the coffee at low prices on the domestic market in order to get the VAT refund.

The tax frauds have not only caused big losses to the coffee making provinces and the authentic businesses, but have also blocked the coffee sources. The enterprises which fulfill their tax duties and make real export, could not buy material coffee in the domestic market.

This has made the coffee prices escalate, threatening to spoil the Vietnamese coffee export plan. Vietnamese exporters may miss the opportunities to export coffee when the prices go up in the international market.

Dak Lak online newspaper has reported the low VAT collection from coffee in the province, the “coffee granary” of Vietnam. The decrease of VND35 billion in the tax collection has been reported for Buon Ma Thuot City. Meanwhile, the Buon Ho town, Cu M’gar district have seen the decreases of VND35 billion and VND31 billion.

Tax frauds hinder sustainable coffee production

Vietnamese have been following the sustainable production mechanism for the last few years. Meanwhile, experts said from 2015, European roasters would only accept the coffee products made under the sustainable production method.

It is estimated that 8-10 percent of Vietnam’s coffee output, or 100,000-150,000 tons a year is sustainable production coffee.

The chief representative of a company which is a member of ECF said her company wants to know if the tax frauds in Vietnam can be solved thoroughly when drawing up the plan to buy coffee in Vietnam.

The ECF’s Secretary General also said ECF wants to know how Vietnam would handle the tax frauds “before the new crop begins,” so that its members can plan the coffee trade deals for the next crop, which is near, commencing from October 1, 2013.

Nguyen Van Yen, Deputy Chair of Lam Dong province, has warned about the serious consequences of the tax frauds. In the immediate time, the frauds caused the loss of the budget revenue. In the long term, they would drive authentic coffee companies in Lam Dong and the Central Highlands to the verge of bankruptcy.

“Once the “black companies” can evade tax, they would be willing to pay higher to collect coffee materials. If so, authentic enterprises would not be able to compete with them,” he explained.


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