|Customs seized fake goods in June 2021. Photo: Thai Binh.
Accepting breakeven but still facing difficulties in competing
|Enterprises propose competent authorities to be more drastic in performance and strengthen the dissemination to raise consumers’ awareness about the consequences of counterfeit goods.
Talking about losses of enterprises amid the situation of smuggled goods and trade fraud, Mr Hoang Huu Loc, Deputy Head of the Sales Department of Dry Cell and Storage Battery Joint Stock Company (Pinaco), said that the tax rate for storage batteries imported in ASEAN is 0%, from South Korea in 2022 at 5% and will reduce by 2.5% per year. By 2024, the tax rate will be 0%. However, all imported products are subject to a value-added tax (VAT) of 8%.
Using sophisticated tricks, on the VAT invoice, the price of the illegally imported battery is only 66% of the public price to the customers. Therefore, a 120Ah battery is valued at VND2.84 million, but on the VAT invoice, it is valued at VND1.868 million, VND971,600 lower than the public price, if we multiple 8% of VAT with the difference, leading to a revenue leakage of VND77,728.
According to statistics, battery companies spend about VND144 billion to import about 140,000 storage batteries from Korea. Therefore, if the companies use the above tricks, the State will lose about VND11 billion of VAT, excluding import tax. In addition, many types of batteries imported from many other states in ASEAN are not subject to import tax, but importers may evade VAT if they use this trick.
The Pinaco representative said that each smuggled battery’s price will reduce by 25-36%. Therefore, the price of smuggled batteries is very low, making it difficult to compete because the average profit of battery manufacturers is only about 3-4%. If the price is reduced, even to the production cost, the selling price is still 10-15% higher than that of smuggled batteries.
Regarding the counterfeit goods, Mr. Duong Duc Duy, Head of the Project Management Board of Rang Dong Light Source and Vacuum Flask Joint Stock Company, said that the company’s LED bulb products are counterfeited widely on the market and offered in distribution systems with low prices and attractive discount rates. This affects the company’s revenue, and consumers have to spend a lot of money but cannot use authentic products.
“With the rapid development of technology, online violations take place very strongly. Subjects build their own website, using the company’s image, but when delivering the products to the distribution agent, they send poor-quality products. In addition, some subjects have recruited sales agents via social networks, and offered to sell products via e-commerce platforms”, Duy said.
Despite the intervention of the National Office of Intellectual Property and law firms, according to the representative, many cases are still deliberately violated with sophisticated methods.
Supplementing strict sanctions
Mr. Adrian Clarke, Adrian Clarke. Corporate Affairs Manager at JTI (Vietnam), called those who were involved in smuggling, production and trading fake goods and trade fraud as dominating market shares from legitimate businesses. However, he said that combating this situation in Vietnam faces challenges greater than other countries in the world because Vietnam has a long border, and criminals have sophisticated tricks.
According to experts and businesses, this situation results from the lack of responsibility and law compliance of a part of officers. Some officers even support violations.
In addition, some legal provisions related to preventing and combatting smuggling and trade fraud still have loopholes and shortcomings. The coordination between law enforcement agencies and businesses have not been effective, and sanctions still are not strict.
Mr. Hoang Huu Loc said that it is necessary to control by the minimum tariff for import tax. Enterprises should cooperate in setting product norms and prices for the State to refer to for tax calculation to prevent trade fraud.
Regariding the problem of counterfeit goods, Mr. Duong Duc Duy suggested that heavy penalties should be supplemented to deter violators, because the administrative sanctioning mechanism based on product value is still insufficient deterrent power. In addition, there should be clear sanctions and a management and supervision mechanism to ensure the interests of enterprises in the e-commerce environment.
Businesses suggested that the authorities need to be more drastic in performance and strengthen the dissemination to raise consumers’ awareness about the consequences of counterfeit goods.
Mr. Nguyen Duc Le, Deputy Director of the Technical Department, Vietnam Directorate of Market Surveillance, said that if businesses, consumers, domestic and international organizations, the authorities do not agree and coordinate in combating this situation, the fighting smuggling, counterfeit goods, and commercial fraud still suffer from difficulties.