Vietnam - Vietnam's high tax may lead to plastic-bag imports

The high tax rate of VND40,000 (US$1.9)per kg on plastic bags has prompted companies to think of importing bags from other Asean countries such as Indonesia and Thailand to save on production costs.

At a meeting held by the Vietnam Plastics Association in HCM City, plastic bag manufacturers raised their concerns about provisions in the Environmental Tax Law, which became effective on January 1.

Under the law, plastic bags are one of seven items with the highest environmental taxes.The tax rate of VND30,000-40,000 per kg on plastic bags was imposed because of the alarming growth of plastic-bag usage, resulting in environmental damage.

Le Quang Doanh, chairman of VPA, said "the law's ultimate aim is to protect the environment and restrict the use of products that cause pollution, but the new tax is not feasible."

Doanh said in the current difficult economic situation, as plastic bags become more expensive due to high taxes, customers could refuse to take shopping bags or small traders at traditional markets could reduce the volume of bags they use to save money.

"The important thing is to raise awareness of the community in using plastic bags in a reasonable way, and the Government should support plans on developing a plastic-bag recycling programme," he said.

Doanh said that any tax policy needs to address the current conditions and should take into consideration the differences between foreign and domestic ones.

Truong Anh Luan, director of Bich Anh Plastics Production Co., said the authorities should re-consider imposing a tax on plastic bags because it could affect the domestic packaging production sector.

Business representatives also debated whether specific products should be taxed and whom to tax, as well as the appropriate tax rate.

Pham Trung Cang, deputy chairman of VPA, said he warned that VND40,000 per kg was too high, and it had hiked prices and reduced the competitiveness of domestic producers.

When company buyers consider importing bags at a cheaper price, domestic bag producers could lose major clients.Cang is also chairman of the management board of Tan Dai Minh Co.

His company faced difficulties when one of his biggest clients, Viet Nhat Fertiliser Co., considered importing plastic bags from Asean countries.

In this case, the environmental protection law could lead to higher unemployment in other sectors such as the seafood and furniture sector, which must use plastic bags in packaging.

Tan Dai Minh Co. is not alone. Le Minh Cuong, chairman of management board of Tan Tien Plastics Co., said the current tax rate would burden his company because it would have to pay VND32-42 billion ($1.5-2 million) per month.

His company's major client Unilever would consider imports of plastic bags from Indonesia and Thailand.Cuong suggested that authorities find a reasonable route to implement the environmental tax.

For instance, the tax rate could begin at VND10,000 a kilo instead of the current VND40,000.Nguyen Xuan Tung, director of Tien Thanh Plastics Co., said his company manufactured plastic bags and wanted a chance to air his views.

He said that companies could not prepare for the law because the tax went into effect less than a year after the law was passed. His company would have to pay VND40 billion each month.

Companies that have no alternative to plastic bags will have to pay the tax.The VPA said authorities have yet to announce standards for "eco-friendly" plastic bags.

The authorities should lay out criteria for manufacturing environmental friendly bags before they begin to tax plastic bags, according to VPA.

This would help businesses switch to producing bio-degradable bags. However, it is still unknown which department will determine this criteria.

The VPA proposed that agencies and ministries take into consideration the production difficulties of businesses that are faced with this tax.

The VPA also said that lawmakers should hold meetings to speak with associations and businesses before promulgating laws.

Quynh Hoa

Viet Nam News

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