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.
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.
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

Pakistan Among Developing Counties Hit Hard by Global Warming

Pakistani officials hope developed nations agree to scale back emissions, offer help in dealing with climate change

Video Speed, Social Media Shape Counterterrorism Probes

Speed is critical in effort to prevent subsequent attacks; demographics of extremists lend themselves to communicating, establishing profiles on digital platforms

Islamic State Oil Trade Seduces Friends, Foes Alike

Terrorist group rakes in up to $500 million a year in sales to customers such as Syrian government, US-supported rebels and Turkey

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Social Media Aids Counter-Terrorism Investigationsi
Katherine Gypson
December 01, 2015 10:06 PM
In the aftermath of the Paris attacks, officials carried out waves of raids and arrests to break up terror cells. As VOA's Katherine Gypson reports, social media can be a key tool for investigators.

Video Social Media Aids Counter-Terrorism Investigations

In the aftermath of the Paris attacks, officials carried out waves of raids and arrests to break up terror cells. As VOA's Katherine Gypson reports, social media can be a key tool for investigators.

Video Russia Marks World AIDS Day With Grim News

While HIV infection rates have steadied or even declined in many European countries, the caseload has grown rapidly in Russia, as VOA's Daniel Schearf reports from Moscow. Over half of the new infections were transmitted through injection drug use.

Video Pakistan Hit Hard by Global Warming

As world leaders meet in Paris to craft a new global agreement aimed at cutting climate-changing greenhouse-gas emissions, many developing countries are watching closely for the final results. While most developing nations contribute much less to global warming than developed countries, they often feel the effects to a disproportionate degree. As Saud Zafar reports from Karachi, one such nation is Pakistan. Aisha Khalid narrates his report.

Video With HIV, Can We Get to Zero?

The theme of this year's World AIDS Day is "Getting to Zero." The U.N. says new HIV infections have been reduced by 35 percent since 2000 and AIDS-related deaths are down by 42 percent since the peak in 2004. VOA's Carol Pearson takes a look at what it might take to actually have an AIDS-free generation.

Video Political Motives Seen Behind Cancelled Cambodian Water Festival

For the fourth time in the five years since more than 350 people were killed in a stampede at Cambodia’s annual water festival, authorities canceled the event this year. Officials blamed environmental reasons as the cause, but many see it as fallout from rising political tensions with a fresh wave of ruling party intimidation against the opposition. David Boyle and Kimlong Meng report from Phnom Penh.

Video African Circus Gives At-Risk Youth a 2nd Chance

Ethiopia hosted the first African Circus Arts Festival this past weekend with performers from seven different African countries. Most of the performers are youngsters coming form challenging backgrounds who say the circus gave them a second chance.

Video US Lawmakers Brace for End-of-Year Battles

U.S. lawmakers are returning to Washington for Congress’ final working weeks of the year. And, as VOA's Michael Bowman reports, a full slate of legislative business awaits them, from keeping the federal government open to resolving a battle with the White House over the admittance of Syrian refugees.

Video Taiwan Looks for Role in South China Sea Dispute

The Taiwanese government is one of several that claims territory in the hotly contested South China Sea, but Taipei has long been sidelined in the dispute, overshadowed by China. Now, as the Philippines challenges Beijing’s claims in an international court at The Hague, Taipei is looking to publicly assert its claims. VOA’s Bill Ide has more from Beijing.

Video After Terrorist Attacks, Support for Refugees Fades

The terrorists who killed and injured almost 500 people around Paris this month are mostly French or Belgian nationals. But at least two apparently took advantage of Europe’s migrant crisis to sneak into the region. The discovery has hardened views about legitimate refugees, including those fleeing the same extremist violence that hit the French capital. Lisa Bryant has this report for VOA from the Paris suburb of Cergy-Pontoise

Video Syrian Refugees in US Express Concern for Those Left Behind

Syrian immigrants in the United States are concerned about the negative tide of public opinion and the politicians who want to block a U.S. plan to accept 10,000 Syrian refugees. Zlatica Hoke reports many Americans are fighting to dispel suspicions linking refugees to terrorists.

Video Thais Send Security Concerns Down the River

As Thailand takes in the annual Loy Krathong festival, many ponder the country’s future and security. Steve Sandford reports from Chiang Mai.

Video Islamic State Unfazed by Losses in Iraq, Syria

Progress in the U.S.-led effort to beat Islamic State on its home turf in Iraq and Syria has led some to speculate the terror group may be growing desperate. But counterterror officials say that is not the case, and warn the recent spate of terror attacks is merely part of the group’s evolution. VOA National Security correspondent Jeff Seldin has more.

VOA Blogs

World Currencies


Rates may not be current.