Joining many FTAs, Vietnamese firms are worried about being sued for tax evasion

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Steel is the industry facing the most cases of evading trade remedies. Photo: Nguyen Thanh

Frequency of investigations doubled

In recent years, there have been cases when trade remedies have been applied, this has affected manufacturing enterprises to overcome them by moving production out of the countries or economies where the measures are applied.

According to the Ministry of Industry and Trade, because of favorable policies for foreign investment, Vietnam is one of the choices of enterprises deciding to shift production. However, after receiving new production capacity, exports from Vietnam increased rapidly, making it easy for Vietnam to become the object of monitoring, investigating and applying additional trade remedies measures by importing countries.

The main cause of this problem is that import partners suspect goods do not meet the condition of "significant transformation" in Vietnam.In particular, the doubts about Vietnam's goods which “transforming significantly” in Vietnam mainly focused on itemsbeing subject to trade remedies, which are exported in large quantities, increasing dramatically to countries or items suspected of producing capacity in Vietnam.

In terms of data, the Ministry of Industry and Trade stated that in the period 2000 - 2016, there were 15 cases of evasion of trade remedy tax on Vietnam's exports, an average of a case per year.

However, in 2017 and the first quarter of 2020, there were seven new cases initiated, an average of2 cases were initiated each year.

Initiating investigation of tax evasion itself

Recently, ministries and branches have implemented many measuresto evade trade remedies and origin fraud. However, up to now, the risk of evading trade remedies and origin fraud is increasing, especially in the context of escalating US-China trade conflict and joining many new generation FTAssuch as the CPTPP and EVFTA.

The Ministry of Industry and Trade cited that, most recently, the United Stateshas investigated tax evasion the most for Vietnam with 10 cases,accounting for nearly 50% of the total number of cases, initiated the tax evasion investigation withstainless steel products from Vietnam.

It is relatively rare when the US authoritiesinitiate their own investigations without requests of US enterprises. This shows that the United States is strengthening the management of goods being subject to tax of trade remedies to ensure the effective implementation of the measures taken.

Notably, in addition to initiating its own investigation of the case, the United States is ready to accept requests for tax evasion investigations even though the plaintiffs of the case have filed the documents over the prescribed deadline. In addition, Vietnam's sued products are not limited to industrial products, but are also at increased risk for agricultural products.

In the current context, some experts assessed that if Vietnam did not take positive measures to deal with the problem of illegal evasion of trade remedies, especially through origin fraud, it would affect specific enterprises and industries. In the long term, this would negatively impact the competitiveness of our economy, especially in the context of joining a series of FTAs with high requirements on origin.

In the context of increasing protectionism, especially for many product groups such as steel, aluminum, agricultural products, fishery products, to minimize the possibility of application of trade remedies, it is necessary to have an overall and long-term strategyin developing production chains and improving added value for Vietnam's exports.

According to the Ministry of Industry and Trade, in addition to the Government's efforts, enterprises also play an important and decisive role to limit the risk of lawsuits for tax evasion and origin fraud.

Specifically, enterprises must be resolute in not participating, abetting the frauds of origin or illegal transshipment. In fact, if these acts are detected, the importing country will impose "sanctions", in many cases the enterprise will lose the entire export market involved.

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In addition, if detecting signs of violations, enterprises should proactively coordinate with functional agencies to investigate, prevent and avoid the behavior of some enterprises affecting fair production and business enterprises.