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

    In Britain, The Sun Still Doesn’t Shine

    Invoking Spitfires and Merlin, Leave voters insist country can be great again, following surprising 'Brexit' vote last week

    Double Wave of Suicide Bombings Puts Lebanon, Refugees on Edge

    Following suicide bombings in Christian town of Al-Qaa, on Lebanon's northeast border with Syria, fears of further bombings have risen

    US Senators Warned on Zika After Failing to Pass Funding

    Zika threats and challenges, as well as issues of contraception and vaccines, spelled out as lawmakers point fingers

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Slow Rebuilding Amid Boko Haram Destruction in Nigeria’s Northeasti
    X
    June 29, 2016 6:15 PM
    Military operations have chased Boko Haram out of towns and cities in Nigeria’s northeast since early last year. But it is only recently that people have begun returning to their homes in Adamawa state, near the border with Cameroon, to try to rebuild their lives. For VOA, Chris Stein traveled to the area and has this report.
    Video

    Video Slow Rebuilding Amid Boko Haram Destruction in Nigeria’s Northeast

    Military operations have chased Boko Haram out of towns and cities in Nigeria’s northeast since early last year. But it is only recently that people have begun returning to their homes in Adamawa state, near the border with Cameroon, to try to rebuild their lives. For VOA, Chris Stein traveled to the area and has this report.
    Video

    Video Clinton Leads Trump, But Many Voters Don't Like Either

    In the U.S. presidential race, most recent polls show Democrat Hillary Clinton with a steady lead over Republican Donald Trump as both presumptive party nominees prepare for their party conventions next month. Trump’s disapproval ratings have risen in some recent surveys, but Clinton also suffers from high negative ratings, suggesting both candidates have a lot of work to do to improve their images before the November election. VOA National correspondent Jim Malone has more from Washington.
    Video

    Video New US Ambassador to Somalia Faces Heavy Challenges

    The new U.S. envoy to Somalia, who was sworn into office Monday, will be the first American ambassador to that nation in 25 years. He will take up his post as Somalia faces a number of crucial issues, including insecurity, an upcoming election, and the potential closure of the Dadaab refugee camp in Kenya. VOA’s Jill Craig asked Somalis living in Kenya’s capital city Nairobi how they feel about the U.S. finally installing a new ambassador.
    Video

    Video At National Zoo, Captivating Animal Sculptures Illustrate Tragedy of Ocean Pollution

    The National Zoo in Washington, D.C., is home to about 1,800 animals, representing 300 species. But throughout the summer, visitors can also see other kinds of creatures there. They are larger-than-life animal sculptures that speak volumes about a global issue — the massive plastic pollution in our oceans. VOA's June Soh takes us to the zoo's special exhibit, called Washed Ashore: Art to Save the Sea.
    Video

    Video Baghdad Bikers Defy War with a Roar

    Baghdad is a city of contradictions. War is a constant. Explosions and kidnappings are part of daily life. But the Iraqi capital remains a thriving city, even if a little beat up. VOA's Sharon Behn reports on how some in Baghdad are defying the stereotype of a nation at war by pursuing a lifestyle known for its iconic symbols of rebellion: motorbikes, leather jackets and roaring engines.
    Video

    Video Melting Pot of Immigrants Working to Restore US Capitol Dome

    The American Iron Works company is one of the firms working to renovate the iconic U.S. Capitol Dome. The company employs immigrants of many different cultural and national backgrounds. VOA’s Arman Tarjimanyan has more.
    Video

    Video Testing Bamboo as Building Material

    For thousands of years various species of bamboo - one of the world's most versatile plants - have been used for diverse purposes ranging from food and medicine to textiles and construction. But its use on a large scale is hampered because it's not manufactured to specific standards but grown in the ground. A University of Pittsburgh professor is on track to changing that. VOA’s George Putic reports.
    Video

    Video Orphanage in Iraqi City Houses Kids Who Lost their Parents to Attacks by IS

    An orphanage in Iraqi Kurdistan has become home to scores of Yazidi children who lost their parents after Islamic State militants took over Sinjar in Iraq’s Nineveh Province in 2014. Iraqi Kurdish forces backed by the U.S. airstrikes have since recaptured Sinjar but the need for the care provided by the orphanage continues. VOA’s Kawa Omar filed this report narrated by Rob Raffaele.
    Video

    Video Re-Opening Old Wounds in a Bullet-Riddled Cultural Landmark

    A cultural landmark before Lebanon’s civil war transformed it into a nest of snipers, Beirut’s ‘Yellow House’ is once again set to play a crucial role in the city.  Built in a neo-Ottoman style in the 1920s, in September it is set to be re-opened as a ‘memory museum’ - its bullet-riddled walls and bunkered positions overlooking the city’s notorious ‘Green Line’ maintained for posterity. John Owens reports from Beirut.
    Video

    Video Brexit Resounds in US Presidential Contest

    Britain’s decision to leave the European Union is resounding in America’s presidential race. As VOA’s Michael Bowman reports, Republican presumptive nominee Donald Trump sees Britain’s move as an affirmation of his campaign’s core messages, while Democrat Hillary Clinton sees the episode as further evidence that Trump is unfit to be president.
    Video

    Video NASA Juno Spacecraft, Nearing Jupiter, to Shed Light on Gas Giant

    After a five-year journey, the spacecraft Juno is nearing its destination, the giant planet Jupiter, where it will enter orbit and start sending data back July 4th. As Mike O'Sullivan reports from Pasadena, California, the craft will pierce the veil of Jupiter's dense cloud cover to reveal its mysteries.
    Video

    Video Orlando Shooting Changes Debate on Gun Control

    It’s been nearly two weeks since the largest mass shooting ever in the United States. Despite public calls for tighter gun control laws, Congress is at an impasse. Democratic lawmakers resorted to a 1960s civil rights tactic to portray their frustration. VOA’s Carolyn Presutti explains how the Orlando, Florida shooting is changing the debate.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.9030
    JPY
    USD
    102.41
    GBP
    USD
    0.7470
    CAD
    USD
    1.3038
    INR
    USD
    67.919

    Rates may not be current.