Export Tax Hurting Vietnamese Wood Floor Companies

Hanoi, Vietnam, Nov. 17, 2008--Wood processing companies are protesting the 10 percent export tax levied on flooring products made of imported wood, saying it is causing losses and forcing suspension of production.

They also say that the decision of the Ministry of Finance, which took immediate effect on Sept. 23, did not allow them to factor the increased costs into contracts already signed for the remaining months of the year and the first months of next year.

Do Thi Kim Loan, general director of Sao Nam Company, said her company had to cut production and temporarily lay off more than two thirds of its workers this month.

“Previously, our company shipped 10 containers a month on average but last month we exported only two containers and have had to temporarily cease production this month,” said Loan.

“The Ministry of Finance should announce a schedule [for the tax change] so that businesses can prepare [for it]. It should not put businesses into difficulties.

“Wood flooring export contracts have been signed to the end of this year, even next year. The tariff will make it difficult for Vietnamese wood flooring products to compete with other countries’.”

Huynh Cong Tin, director of Au A Lien Hiep Company, said most wood processing companies had not known about the 10 percent export tax when negotiating with customers.

“We will make no profit, and could even suffer losses after paying the tax,” he said.

Tran Dinh Gia Minh, deputy general director of the Van Viet Company, said his company and some other wood processing companies had tried to re-negotiate prices with customers after learning of the tax, but they were not successful.

As a result, wood flooring exporters would meet difficulties until the end of this year or early next year, he said.

Luan Thu, a sales executive of Pro-Concepts Company, said it had more than ten wood flooring shipments worth $800,000 which were yet to be shipped after the 10-percent tax was introduced. The company was planning to cut production, she added.

In last week’s National Assembly (NA) session, Minister of Finance Vu Van Ninh had said the 10 percent export tax on flooring made with imported wood was aimed at preventing fraudulent tax evasion by exporters.

Prior to the September 23 decision, flooring products made from imported wood benefited from a zero percent export tax as they had already been subjected to the 10 percent import tax.

However, many cases had come to light where this provision was misused by exporters fraudulently claiming that their products were made of imported wood, while they were actually made with wood taken from natural forests.

In order to limit logging of natural forests, all products made of wood taken from them are subjected to an export tax of 10 percent.

The new decision was applied as authorities found it extremely hard to differentiate between products that were made of imported wood and those made with wood taken from natural forests in Vietnam, Ninh said.

But the decision means wood flooring makers now have to pay both import and export taxes if they use imported wood for their production.