The Ministry of Industry (MOI) has snubbed the proposal on electronic component import tax reduction, saying that the move may hamper local electronic parts production.
The proposal by the Electronics and Informatics Corporation on tax reduction would encourage manufacture and assembly, while dampening the plights of investors who have millions of dollars in component and accessory workshops, reported the MOI in its letter to the Ministry of Finance (MOF).
Government policy supports industry development, said Do Huu Hao, Deputy Minister of MOI.
This is clear in Decree 78/2003/ND-CP dated July 1, 2003 on the implementation of the Common Effective Preferential Tariff (CEPT) for the 2003-2006 period, and Decision 110/2003/QD-BTC by the Ministry of Finance (MOF) dated July 25, 2003 on preferential tariffs.
The two decisions clearly delineate the roadmap for tax reduction, in line with regional and world economic integration. The roadmap provides electronic accessory and parts production an interim to develop and compete with similar imported products.
Investors prefer to develop assembly workshops for immediate profit and minimal investment. The norm is to apply preferential tax schemes to encourage investment within industry that requires huge capital and a long span of capital recovery.
Reassured investors, guided by the roadmap, have injected millions of dollars on electronic parts production.
Orion-Hanel, TT Electronics, Daewoo-Hanel all produce electronic accessories provided to local assembly companies, said Mr Hao.
Orion-Hanel has launched a second production line of TV tubes for 21-inch TVs recently, raising the capacity of the two lines to 4.5mil units a year. The joint venture will launch a third production line in 2006, pushing capacity to 6.5mil units.
Investors have realised commitments while investing further in Vietnam, and Government assistance by maintaining stable policies is critical for this to continue. If existing investor business is successful, the effect is compounding, drawing further domestic and new international investment.
It is necessary to maintain protection on accessories that can be produced locally through a preferential tax system, said Mr Hao from MOI. The tax rate of 0-5% will be applied only on electronics parts that cannot be produced domestically by AFTA implementation.
Electronics companies held a meeting with the relevant departments of the Ministry of Planning and Investment (MPI) yesterday afternoon on the issue, although no clear resolution was reached. Nguyen Xuan Trung, Deputy Head of the Foreign Investment Agency said another meeting would be assembled with the participation of higher-ranking officials.
The relevant ministries, including MOI, MPI have to explain their positions fully as the MOF final decision on the tax system adjustment will come January 1, 2005.