Vietnam scraps 5% VAT on coffee, other agro products

Thursday, 16 January 2014 00:00 -     - {{hitsCtrl.values.hits}}

HANOI (Reuters): Vietnam has abolished a controversial 5% value added tax (VAT) on agricultural products, including coffee, but traders said some provinces were still awaiting detailed guidelines for its implementation. The move could help bring more coffee from the world’s biggest producer of the robusta variety to the global market. Delays in processing tax refund claims on exports of coffee, rubber and cocoa last year had held up shipments, and despite the government pledging a relaxation of rebate procedures, confusion over the process has deterred buyers. As of Jan. 1, 2014, raw and semi-processed agricultural, husbandry and aquatic produce are exempted from the VAT payment, Prime Minister Nguyen Tan Dung said in a decree. The 21-page decree, seen by Reuters, did not mention the word ‘coffee’ or name any specific products. It said the Finance Ministry would guide the implementation. “It’s not clear, so only some provincial authorities have implemented it while others have not,” said a coffee trader in Daklak, Vietnam’s largest growing province. “They are still waiting for the Finance Ministry’s detailed guidance.” In the Central Highlands coffee belt comprising five provinces, Lam Dong, Gia Lai and Kontum have been applying the exemption, while Daklak and Dak Nong have yet to abolish the 5% tax, traders said. In Gia Lai province the tax authority listed coffee, pepper and cassava among agro-products for VAT exemption, the provincial tax department said in a letter seen by Reuters. “This is a good policy, it reduces the time for paperwork and also the cost of coffee,” another trader at a European trading firm in Ho Chi Minh City said. But he said the export market has not moved swiftly due to thin foreign buying demand, and also as buyers were seeking lower prices than exporters could accept. Vietnamese robusta grade 2, 5% black and broken beans were quoted at discounts of $20-$25 a ton to London’s March contract, while bids stood at discounts of $30 a ton to the March contract, unchanged from last week. The March contract edged up $12, or 0.7%, to settle at $1,739 a ton on Friday.