VietNamNet Bridge – Novelis Vietnam has been suspected by Vietnamese concerned agencies of attempting to evade tax by outsourcing aluminum strip coil abroad for export to third countries.

Novelis and its “low-tech” project in Vietnam

Licensed in August 2012, Novelis Vietnam, a 100 percent foreign invested in VSIP II Industrial Zone in the southern province of Binh Duong, has become operational since July 2013 with the total investment capital of $3.78 million.

The enterprise collects empty beverage cans made of aluminum from scrap collection dealers, then selects the cans, classifies, compresses and then packs them.

The consignments of aluminum cans are carried away to South Korea, where the bundles of aluminum would be processed into aluminum strip coils. After that, the coils would be imported back to Vietnam before they are sold to a partner in Saudi Arabia.

Explaining the outsourcing to South Korea, Novelis Vietnam said it initially planned to carry out all the phases of the production chain in Vietnam, from collecting empty cans to making aluminum coils. However, it is meeting big difficulties in the plan implementation because of the required high investment capital and the low demand for aluminum plates in Vietnam.

In 2013, the domestic market only needed 120,000 tons of this kind of product.

By the end of 2013, the enterprise had reportedly 46 times exported bundles of cans to South Korea, 9 times imported aluminum strip coils from South Korea and 9 times exported the finished products to Saudi Arabia.

On February 25, 2013, Novelis Vietnam received a notice from the local customs agency which requested to stop the outsource contracts with the foreign partners.

Novelis opposed the decision, saying that the decision has badly affected its business plan.

Evading tax by outsourcing products abroad

According to the Binh Duong provincial Customs Agency, by exporting materials to South Korea, importing finished products to Vietnam and then exporting the products to Saudi Arabia, Novelis Vietnam has tried to evade the material export tax.

The problem lies in the fact that if importing back the products outsourced overseas, the enterprise can enjoy lower import tariff.

If the outsourced products had been exported directly to Saudi Arabia, Novelis Vietnam would have been imposed the tax rate of 22 percent. As such, with the exported 8,000 tons of scrap aluminum and the average unit price of $1,400 per ton, the company would have been taxed VND52 billion.

However, since Novelis Vietnam imported the aluminum products before exporting to Saudi Arabia, the total tax sum it had to pay was VND19.4 billion only.

As such, according to the concerned agencies, the company has “saved” VND32.6 billion in tax so far for the 8,000 tons of scrap outsourced. The figure could be up to VND97.8 billion, if 24,000 tons of scrap is recycled as written down in the contract.

Customs officers said they only found conveyor belts and some simple equipment at the company’s factory, which can handle with simple works of classifying and cleaning cans.

The customs agency has also pointed out that the sale of aluminum strip coils abroad, not for the domestic production, does not come in accordance with the Vietnam’s policy on outsourcing products abroad. If the enterprise continues going this way, it would harm the domestic material market.

Dien Dan Dau Tu