State budget earns nothing from $8 billion of phone exports

VietNamNet Bridge – Phone and phone part exports prove to be the biggest dollar earner in Vietnam, with the export turnover of $8.1 billion in the first five months of the year. However, a very small percentage of the sum of money went to the state budget.

phone export, budget revenue

A report of the General Department of Customs showed a sharp increase in the total export turnover in May 2013, reaching $11.7 billion, an increase of 16 percent in comparison with the same period of the last year. This helped reduce the trade deficit to $553 million in May, down by 40 percent over the month before.

Of the high export turnover, phone and phone accessories exports reached $8.1 billion, which represented a sharp increase of 113 percent in comparison with the same period of 2012. With the high export turnover, phone and phone accessories exports have surpassed garments and textiles to become the biggest export item.

The exports mostly came from foreign invested enterprises, including Samsung which alone exported $8 billion.

If considering the exports in the first four months of the year, the export turnover was $5.97 billion, up by 97 percent if compared with the first four months of 2012.

The Ministry of Industry and Trade has predicted that the phone and phone accessories exports may far exceed the threshold of $20 billion this year. If so, the phone exports would outstrip the exports of crude oil, which has always been the biggest export item of Vietnam.

However, analysts have commented that Vietnam has not benefited from the high exports of mobile phone and phone accessories. The State cannot collect tax from the exports, once it has agreed to exempt many kinds of tax for the investors in the field. The tax incentives have been given in return for the big guys’ decisions to set up investment projects in Vietnam.

In 2010, just one year after Samsung Electronics put the mobile phone factory in Bac Ninh province into operation, the world’s biggest electronics group began a campaign to ask the government of Vietnam to recognize Samsung Electronics Vietnam as a high technology enterprise.

The move showed that Samsung wants to enjoy the highest possible investment incentives: the low 10 percent corporate income tax for the whole life of the project, the tax exemption for the first four years and the 50 percent tax cut in the next nine years.

At that time, Samsung Electronics Vietnam could not meet the requirements to be recognized as a high technology enterprise, if referring to the High Technology Law. The Article No. 18 of the law stipulates that an enterprise would be considered for the recognition as a high technology enterprise when it has had three years of operation at least.

Meanwhile, Samsung Electronics Vietnam had been operating in Vietnam for one year only by that time.

Besides, high technology enterprises need to satisfy other requirements in the research and development activities. For example, the expenses on the R&D activities in the three years must be equal to at least one percent of the turnover, while the number of workers relating to the R&D activities must account for 5 percent of the total number of workers.

Especially, the mobile phones made by Samsung Electronics Vietnam are not found in the list of the high technology products.

According to the Bac Ninh provincial Taxation Agency, from 2009 to 2012, Samsung’s total turnover was VND436.293 trillion and the profit was VND35.5 trillion. However, by April 26, 2013, it has paid only VND1 trillion in taxes to the state budget, a very modest figure if compared with the turnover and profit.

With a turnover of VND35.5 trillion, an enterprise has to pay VND1 trillion to the state budget. How much tax then would the state collect for the turnover of $8.1 billion, or VND170 trillion?

Dat Viet

phone export, budget revenue