Proposal to not exempt tax on cross-border e-commerce goods

The Vietnam Chamber of Commerce and Industry (VCCI) has called for clearer regulations on import tax for goods traded via e-commerce.

In a recent move, the VCCI submitted its comments on the draft decree concerning customs management of e-commerce imports and exports to the Ministry of Finance (MoF).

Evaluating the regulation on import tax exemption for orders with a value of 1 million VND (40 USD) or less, VCCI said that this mechanism was not really suitable, creating inequality with domestically-produced goods.

First, the value of each e-commerce order is often low, mostly not exceeding 1 million VND. For example, more than 324.1 million imported products were sold through Shopee last year, generating revenue of 14.2 trillion VND, or an average value of only about 43,682 VND per product.

Thus, the regulation on the tax exemption threshold of 1 million VND means that most imported e-commerce goods will not be subject to import tax.

Second, domestic manufacturing enterprises must pay import tax on input materials, while imported e-commerce goods are completely exempted. This creates inequality in tax policy, giving foreign goods a competitive advantage.

The VCCI believes that the drafting agency should consider applying a comprehensive import tax policy, without exemptions or reductions for imported e-commerce goods.

However, the development of import tax policies for e-commerce goods will face many challenges, including the difficulty in applying HS code regulations as for traditionally imported goods for e-commerce goods.

The diversity of goods via e-commerce can lead to large-scale difficulties in accurately determining HS codes, delaying customs clearance and delivery, and even leading to order cancellations, causing damage to both sellers and e-commerce platforms.

The tax exemption threshold of 1 million VND was essentially based on the principle that the administrative costs for low-value goods could far exceed the amount of tax collected, emphasised VCCI.

To solve this problem, international experience showed that it was necessary to simplify the tax schedule for e-commerce goods.

For example, HS codes (codes for classifying goods in import and export) can be grouped into a number of 'goods baskets' according to industry groups or uses. Each 'basket' corresponds to a specific tax rate.

For example, basket one includes clothing, footwear, textiles, bedding; basket two includes electronic devices such as computers, phones, headphones.

In this way, businesses can easily classify goods instead of having to determine specific HS codes for each individual product.

Canada has applied this form since 2012, using three groups of goods to replace nearly 5,400 HS codes.

Therefore, VCCI recommended that the drafting agency consider amending the regulations on import tax on goods via e-commerce in the direction of building a simplified tax rate schedule and applying it to all orders, regardless of value.