Taking advantage of export production to smuggle and evade tax

Cashew nuts are imported at Cai Mep international port (CMIT), Ba Ria-Vung Tau. Photo: Thu Hòa

Import goods for export production but goods are for domestic consumption

Taking advantage of preferential policies and facilitating import procedures and tax for export production enterprises, some cashew nut production enterprises have imported raw materials for export production (type E31).

However, after completing customs procedures, there are cases where imported goods are not put into production or only a part of raw materials are brought into production to create export products. Then the remaining raw materials are sold to the domestic market without carrying out customs procedures, without changing the purpose of use as prescribed, aiming to benefit from the difference in tax and product policies. Notably, the import of raw cashew nuts accounts for a very large proportion of these cases.

In the process of collecting information and documents, the Anti-Smuggling and Investigation Department has investigated and verified three cases related to domestic consumption of imported raw cashew nuts for export production without carrying out customs procedures. The unit also prosecuted two criminal cases for smuggling.

Appropriating billions of VND

At the recent meeting of the Anti-Smuggling and Investigation Department in 2022, the representative of the unit said that two cases have been criminally prosecuted related to Dai Tai Trading, Production and Service Co., Ltd. (in 2018) and Thai Binh Agricultural Products Import-Export Joint Stock Company (in 2019).

From July 19, 2017 to September 25, 2017, Dai Tai Trading Production Service Co., Ltd. opened five import declarations of 582,880 tons of raw cashew nuts, raw materials for export production (type E31), worth nearly VND41.8 billion. The company was exempted from import tax (5%) totaling more than VND2 billion. However, the company did not put imported raw material into production for export. They transferred imported raw materials to domestic consumption.

For Thai Binh Agricultural Products Import-Export Joint Stock Company, the amount of infringing goods is much larger. The investigation revealed that this business opened a total of 70 import declarations of type E31, importing more than 11,072 tons of raw cashew nuts, totaling more than VND440 billion from African countries.

After that, the company only opened two export declarations of type E62, exporting more than 20 tons of cashew kernels (equivalent to more than 100 tons of raw cashews put into production), totaling more than VND4.7 billion.

Thai Binh Agricultural Products Import-Export Joint Stock Company has transferred for domestic consumption more than 10,970 tons of raw cashew nuts, worth VND436 billion, with the amount of tax appropriated totaling about VND21.8 billion.

Besides the above two cases, the General Department of Vietnam Customs is investigating and verifying another enterprise's activities of transferring imported raw material for export production to domestic consumption. Initially, the Customs authority identified that, from 2013 to 2018, this company opened 134 declarations to import nearly 31,000 tons of raw cashew nuts, worth VND1,155.76 billion. However, during the above period, the company transferred to domestic consumption of nearly 14,900 tons of raw cashew nuts, worth more than VND567 billion, evading more than VND28 billion in tax.

After prosecuting the two cases as mentioned above, to ensure prevention and strict management of businesses importing cashew nuts as raw materials for export production, avoiding taking advantage to sell for domestic consumption, the General Department of Vietnam Customs promptly directed professional units to issue warnings and professional instructions to local customs departments. Accordingly, the General Department emphasized methods and tricks of the enterprises involved, and requested the units to review and strictly handle enterprises that violated the law.

Many hidden risks

The Anti-Smuggling and Investigation Department said that the import of raw cashew nuts in the form of E31 was and would contain many potential problems in management. The facilitation and open conditions for enterprises to import raw materials for export production would be an opportunity for subjects to take advantage to smuggle, evade taxes if it was not strictly controlled.

It also affects the interests of genuine cashew nut production enterprises, creating unfair competition, damaging the domestic market, causing loss of revenue to the state budget and adversely affecting the lives of cashew farmers.

Some common methods and tricks include businesses creating trust by setting up factories, warehouses, installing machinery and equipment to ensure the business condition of export production in order to get approval for importing type E31 in accordance with the provisions of law.

After that, the enterprise imported raw cashew nuts, put them into processing and exported a number of shipments in small quantities in accordance with the law.

Next, the enterprise imported a large number of raw cashew nuts in a short time. After the imported goods are cleared, businesses immediately sell them to the domestic market without going through customs procedures as prescribed, benefiting from import tax evasion and other regulations on product policies, then they changed residence, production plant or dissolve the business.

In addition, the business frequently changes its business profile. Accordingly, if the enterprise did not operate at the registered location when carrying out the procedures for establishing the enterprise, the director or legal representative of the enterprise is not the real owner but they usually hired a person to act.

Furthermore, enterprises often change the address of operation without notifying the management agency, the business registration certificate often changes many times in terms of the legal representative, head office address and business lines.