VietNamNet Bridge - With no tax refund for inventories, businesses complain they will lack working capital for operations. The new regulation will take effect on July 1.

Under the amended VAT Law, enterprises which have minus input VAT for 12 consecutive months because of inventories will no longer get a tax refund.

Nguyen Quoc Anh, chair of the HCMC Rubber & Plastics Association, said the new regulation will place big difficulties on the enterprises in industries which have to store materials in large quantities to serve production.

Rubber processing, for example, is a seasonal production industry. Enterprises have to store materials for many months to maintain production. They also tend to buy more materials when the prices go down, therefore, the inventory level is usually high. If enterprises cannot get tax refunds for the inventories, their capital costs will be high.

With no tax refund for inventories, businesses complain they will lack working capital for operations.

Tran Cuong, director of a garment company in HCMC, said in general, his company has to buy materials 2-3 months before the production time and the inventory level is 20-30 percent on average. If the company cannot get tax refunds for the inventories, it would lack hundreds of millions of dong for working capital, a big sum of money for acsmall business like his. 

“Since we lack capital, we will have to borrow money from banks, which will push our capital cost up and make our products less competitive,” he said.

Nguyen Thai Son, a tax expert, commented that the General Department of Taxation (GDT) seems to impose stricter regulations on tax refund. 

At first, enterprises could get a tax refund if they had minus input VAT for 3 months because of inventories. Later, the time was extended to 12 months, and with the latest decision, no tax refund will be considered for inventories.

Son pointed out that enterprises in fields which have to store materials in large quantities such as steel, building materials, rubber, plastics and textile & garments will suffer the most.

The Ministry of Finance affirmed that with the old regulation on tax refund, enterprises had to spend a lot of time and follow many procedures to respect the law, while it put a big workload on taxation bodies. 

Meanwhile, the new regulation will create equality, reduce fraud and prevent businesses from exploiting open regulations to get tax refunds.

However, Son said that the reason cited by MOF to protect the new regulation is unconvincing. It is true that some businesses committed fraud by buying invoices in the black market and getting tax refunds.

Son said taxation bodies need to apply necessary measures to prevent fraud rather than applying strict regulation on all businesses.


Chi Mai