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

Photogallery Americans Celebrate Thanksgiving With Feasts, Festivities

Holiday traditions include turkey dinners, 'turkey trots,' American-style football and New York parade with giant balloons More

Video For Obama, Ferguson Violence is a Personal Issue

With two years left in term, analysts say, president has less to lose by taking conversation on race further More

Video Italian Espresso Expands Into Space

When Italian astronaut Samantha Cristoforetti headed for the ISS, her countrymen worried how she would survive six months drinking only instant coffee More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
South Africa Sees Male Circumcision as Way to Reduce HIV Infectionsi
X
November 28, 2014 3:31 PM
South Africa remains plagued by AIDS despite massive government and NGO efforts on prevention and life-sustaining Anti-Retro-Viral programs. But the country has opened up another front to reduce new HIV infections: promoting circumcision. Emilie Iob reports for VOA News from a pioneering circumcision center in Orange Farm, Johannesburg.
Video

Video South Africa Sees Male Circumcision as Way to Reduce HIV Infections

South Africa remains plagued by AIDS despite massive government and NGO efforts on prevention and life-sustaining Anti-Retro-Viral programs. But the country has opened up another front to reduce new HIV infections: promoting circumcision. Emilie Iob reports for VOA News from a pioneering circumcision center in Orange Farm, Johannesburg.
Video

Video To Make A Living, Nairobi Street Vendors Face Legal Hurdles, Physical Violence

The Nairobi City Council has been accused of brutality in dealing with hawkers in the Central Business District - in order to stop them from illegally selling their wares on the streets. Lenny Ruvaga has more for VOA News from the Kenyan capital.
Video

Video For Obama, Ferguson Violence is a Personal Issue

Throughout the crisis in Ferguson, Missouri, President Barack Obama has urged calm, restraint and respect for the rule of law. But the events in Ferguson have prompted him to call — more openly than he has before — for profound changes to end the racism and distrust that he believes still exists between whites and blacks in the United States. VOA White House correspondent Luis Ramirez reports.
Video

Video Online Magazine Gets Kids Discussing Big Questions

Teen culture in America is often criticized for being superficial. But an online magazine has been encouraging some teenagers to explore deeper issues, and rewarding their efforts. VOA religion reporter Jerome Socolovsky went to this year’s Kidspirit awards ceremony in New York.
Video

Video US Community Kicks Off Thanksgiving With Parade

Thursday is Thanksgiving in the United States, a holiday whose roots go back to the country's earliest days as a British colony. One way Americans celebrate the occasion is with parades. Anush Avetisyan takes us to one such event on the day before Thanksgiving near Washington, where a community's diversity is on display. Joy Wagner narrates
Video

Video Aung San Suu Kyi: Myanmar Opposition to Keep Pushing for Constitutional Change

Myanmar opposition leader Aung San Suu Kyi says she and her supporters will continue pushing to amend a constitutional clause that bars her from running for president next year. VOA's Than Lwin Htun reports from the capital Naypyitaw in this report narrated by Colin Lovett.
Video

Video Mali Attempts to Shut Down Ebola Transmission Chain

Senegal and Nigeria were able to stop small Ebola outbreaks by closely monitoring those who had contact with the sick person and quickly isolating anyone with symptoms. Mali is now scrambling to do the same. VOA’s Anne Look reports from Mali on what the country is doing to shut down the chain of transmission.
Video

Video Ukraine Marks Anniversary of Deadly 1930s Famine

During a commemoration for millions who died of starvation in Ukraine in the early 1930s, President Petro Poroshenko lashed out at Soviet-era totalitarianism for causing the deaths and accused today’s Russian-backed rebels in the east of using similar tactics. VOA’s Daniel Shearf reports from Kyiv.
Video

Video Hong Kong Protests at a Crossroads

New public opinion polls in Hong Kong indicate declining support for pro-democracy demonstrations after weeks of street protests. VOA’s Bill Ide in Guangzhou and Pros Laput in Hong Kong spoke with protesters and observers about whether demonstrators have been too aggressive in pushing for change.
Video

Video US Immigration Relief Imminent for Mixed-Status Families

Tens of thousands of undocumented immigrants in the Washington, D.C., area may benefit from a controversial presidential order announced this week. It's not a path to citizenship, as some activists hoped. But it will allow more immigrants who arrived as children or who have citizen children, to avoid deportation and work legally. VOA's Victoria Macchi talks with one young man who benefited from an earlier presidential order, and whose parents may now benefit after years of living in fear.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8010
JPY
USD
118.31
GBP
USD
0.6371
CAD
USD
1.1397
INR
USD
62.122

Rates may not be current.