Prepared by David Cowen and Noriaki Kinoshita.
Import growth (in dong terms) averaged 8 percent a year during 1997-99, compared with 38 percent during the previous three-year period.
A 1999 technical assistance mission from the Fund’s Fiscal Affairs Department identified the major weaknesses in customs administration as (i) a large element of discretion in impoi valuation; (ii) an extensive application of suspension regimes, which resulted in customs duties and other taxes on imports being collected after goods cleared customs and thus put revenue at significant risks; and (iii) insufficient resources devoted to post-clearance control and audit.
The VAT, along with a special sales tax (excises levied on cars, gasoline, cigarettes, beer and other alcoholic beverages, and a few other items), replaced a cascading turnover lax. Prior to 1999, collections of the turnover tax was relatively stable, except in 1998, when domestic demand weakened sharply as a result of the Asian financial crisis.
On the export side, the government currently collects a corporate income tax, a charge on the use of natural resources, and an after-tax dividend from PetroVietnam—the large, state-owned petroleum conglomerate. In total, the government’s take is about one-half of the value to total crude oil exports, the rest of which is retained by PetroVietnam to fund its operations. On the import side, the government levies import duties on all petroleum products, an excise on gasoline (currently 15 percent), and a VAT (10 percent) on all other products.
Oil revenue is highly sensitive to changes in prices; currently, an increase in oil prices by US$1 per barrel raises government revenue by ½/sup percentage point of GDP.
Vietnam’s tax network is overseen by the General Department of Taxation headquarters in Hanoi and comprises 61 provincial tax offices (PTOs) and 620 district tax offices (DTOs). The PTOs have both operational and supervisory functions, in their administration of tax obligations for 70,000 medium- to large-sized enterprises and oversight of the DTOs. The DTOs administer the tax obligations of the other taxpayers, which comprise around 1 million small enterprises (mainly household businesses) and 10 million farmers.