News / Economy

Vietnamese Tax Dodgers Hurt Foreign Coffee Firms

A man piles coffee cherries while processing them at a buying agent in Son La province, west of Hanoi, Nov. 19, 2012.A man piles coffee cherries while processing them at a buying agent in Son La province, west of Hanoi, Nov. 19, 2012.
x
A man piles coffee cherries while processing them at a buying agent in Son La province, west of Hanoi, Nov. 19, 2012.
A man piles coffee cherries while processing them at a buying agent in Son La province, west of Hanoi, Nov. 19, 2012.
Reuters
Some local dealers are using a tax dodge to buy up much of the coffee in Vietnam, the world's top producer of the robusta variety used for instant coffee, slashing the market share of international traders.

The dealers take advantage of loopholes in Vietnam's system governing value-added-tax payments and refunds for exportable goods, using some of the resulting price advantage to outbid competitors in buying coffee from farmers, traders said.

The coffee is then being sold on to exporters, but leaving a murky paperwork trail.

European Coffee Federation [ECF] secretary general Roel Vaessen said the body, representing major international trade houses and roasters, was concerned about the issue.

"It has been drawn to our attention, we do take it seriously, and we have had internal consultations with our members on how best to address the issue," said Vaessen, declining to comment further.

Vietnam's cash crop

According to the organization's website, ECF members include companies such as Louis Dreyfus, Volcafe, Bernhard Rothfos and Nestle.

Vietnam's total export volumes, worth roughly $3 billion a year, are unlikely to be much affected and consumers worldwide therefore will feel little impact on price, while coffee farmers are getting a bit more for their beans.

The harm arising from the VAT dodge is felt by Vietnam's state coffers, for which coffee provides a major revenue stream, and by companies that pay taxes. Efforts to increase the traceability and transparency of coffee origins also are being damaged.

"This tax dodging has made it difficult for legitimate companies to buy coffee locally," said an executive of a Vietnamese export firm based in Ho Chi Minh City, who asked not to be identified.

International traders estimate their market share of exports has fallen to about 20 percent in the current season, from 35 percent in 2011/12, mostly due to this tax issue.

Foreign firms say it also may have a longer-term impact on foreign direct investment in Vietnam, although the country's dominance in robusta coffee is assured for now.

"Trading companies with expansion plans will put them on ice," said a trader at an international firm, adding that future projects could be shifted to rival robusta coffee producers in Southeast Asia, including Indonesia and Laos.

Unfair advantage

The dealers avoiding VAT can gain a competitive advantage of up to $70 per tonne of coffee they buy from farmers - amounting to about four percent of the total, making it difficult for international traders to compete, traders said.

Liffe robusta coffee futures were at $2,004 per tonne shortly after 1100 GMT on Thursday.

Asked to comment on the tax issue, the chairman of the Vietnam Coffee and Cocoa Association [Vicofa], Luong Van Tu, said: "There are several small businesses that have been dodging the tax, while most others follow government rules properly."

The local authority of the country's largest coffee growing province, Daklak, said it knows of the practice and has set up checkpoints to inspect coffee cargoes for proper invoicing.

Huge export volume

Vietnam exported 24.4 million 60-kg bags of coffee in 2011/2012, according to the U.S. Department of Agriculture. World 2011/2012 coffee exports were estimated by the USDA at around 114.4 million bags.

Its May coffee export volume is forecast to fall to around 100,000 tons, from an estimated 110,000 tons loaded in April, due to slowing trade and difficulties in buying beans locally, traders said.

The tax issue is creating problems with traceability, as invoices can help provide transparency along the supply chain, aiding sustainability certification schemes such as Rainforest Alliance and 4C certified coffee.

"A lot of companies invested serious efforts in building up these sustainably sourced coffee flows, and then because of the tax situation and the way coffee is being channelled locally, that is lost," said an industry source.

You May Like

Karzai's Legacy: Missed Opportunities?

Afghanistan's president leaves behind a much different nation than the one he inherited, yet his legacy from 13 years in power is getting mixed reviews More

Secret Service Chief Under Fire for White House Security Breach

Julia Pierson faces tough questions from lawmakers after recent intrusion at White House, says: 'It is clear that our security plan was not executed properly' More

Frustrated, Liberian Students Want Ebola Fight Role

Thousands have volunteered to go to counties, rural villages to talk to people in their language about deadly virus More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Malaysia Struggles to Stop People Joining Jihadi
X
Mahi Ramakrishnan
September 30, 2014 2:16 PM
Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Malaysia Struggles to Stop People Joining Jihad

Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Could US Have Done More to Stop Rise of Islamic State?

President Obama says airstrikes against Islamic State militants in Syria will likely continue for some time because, in his words, "there is a cancer that has grown for too long." So what if President Obama had acted sooner in Syria to arm more-moderate opponents of both the Islamic State and the Syrian government? VOA State Department Correspondent Scott Stearns reports from the United Nations.
Video

Video Treasure Hunters Seek 'Hidden Treasure' in Central Kenya

Could a cave in a small village in central Kenya be the site of buried treasure? A rumor of riches, left behind by colonialists, has some residents dreaming of wealth, while others see it as a dangerous hoax. VOA's Gabe Joselow has the story.
Video

Video Iran's Rouhani Skeptical on Syria Strikes

Iranian President Hassan Rouhani expressed skepticism Friday that U.S.-led airstrikes in Iraq and Syria could crush Islamic State militants. From New York, VOA’s Margaret Besheer reports the president was also hopeful that questions about Iran’s nuclear program could be resolved soon.
Video

Video US House Speaker: Congress Should Debate Authorization Against IS

As wave after wave of U.S. airstrikes target Islamic State militants, the speaker of the Republican-controlled House of Representatives says he would be willing to call Congress back into session to debate a formal, broad authorization for the use of military force. VOA’s Michael Bowman reports from Washington, where legislators left town 10 days ago for a seven-week recess.
Video

Video Ebola Patients Find No Treatment at Sierra Leone Holding Center

At a holding facility in Makeni, central Sierra Leone, dozens of sick people sit on the floor in an empty university building. They wait in filthy conditions. It's a 16-hour drive by ambulance to Kailahun Ebola treatment center. Adam Bailes was there and reports on what he says are some of the worst situations he has seen since the beginning of this Ebola outbreak. And he says it appears case numbers may already be far worse than authorities acknowledge.
Video

Video Identifying Bodies Found in Texas Border Region

Thousands of immigrants have died after crossing the border from Mexico into remote areas of the southwestern United States in recent years. Local officials in south Texas alone have found hundreds of unidentified bodies and buried them in mass graves in local cemeteries. Now an anthropologist and her students at Baylor University have been exhuming bodies and looking for clues to identify them. VOA’s Greg Flakus has more from Waco, Texas.
Video

Video Ebola Robs Liberians of Chance to Say Good-Bye to Loved Ones

In Liberia, where Ebola has killed more than 1,500 people, authorities have worked hard to convince people to allow specialized burial teams to take away dead bodies. But these safety measures, while necessary, make it hard for people to say good bye to their loved ones. VOA's Anne Look reports on the tragedy from Liberia.
Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.

AppleAndroid

World Currencies

EUR
USD
0.7866
JPY
USD
109.25
GBP
USD
0.6139
CAD
USD
1.1120
INR
USD
61.428

Rates may not be current.