Name: Nguyen Van Chieu (Sam)

ID: 1701007

Subject: Finance and The Global Economy

Lecturer: Mr. Bernardo Jeffrey L. Morante

QUIZ 1

Due date: March 30, 2020

1. Research on the trade policy of Vietnam relating to:

a. Importation Quota on imported products like cars, alcohol (discuss the condition

and terms on the limitation or quota.)

The importation quota is one of the international trade policies with the main purpose of

protecting domestic industries. It is defined as “a direct restriction on the quantity of some good

that may be imported. The restriction is usually enforced by issuing licenses to some group of

individuals or firms” (Krugman, Obstfeld and Melitz, 2015). In practice, Vietnam government

applies various ways to limit the quantity and volume of goods imported into the Vietnamese

territory such as import tariff quota, the designation of import border gates, the designation of

importing companies, and the management of licenses. Of the above, the most popular method is

the import tariff quota, a two-tiered regime that combines two trade policy instruments (import

quota and tariff). According to Vietnam Law on Foreign Trade Management 2017, import tariff

quotas are a measure applied by authority agencies to decide the quantity, volume and value of

imported goods at preferential tax rates compared to those outside the quota. There are some

kinds of goods applied import tariff quota.

 No. Kinds of goods HS Code

1 Salt 2501

2 Tobacco raw material 2401

3 Poultry eggs 0407

The Ministry of Agriculture and Rural Development shall decide on the volume of tariff

quotas for salt, poultry eggs, refined and raw sugar. The Ministry of Industry and Trade shall

decide the amount of tariff quotas for raw material tobacco. Based on relevant international

commitments, the amount of tariff quotas decided annually and domestic supply and demand, the

Ministry of Industry and Trade officially announces the annual amount of tariff quotas for goods

on the list. In 2020, the import quotas for those kinds of goods are announced as below:

No. Kinds of goods Quotas

1 Salt 110,000 tons

2 Tobacco raw material 59,098 tons

3 Poultry eggs 57,194 dozen.

Companies which have the import license for the list of goods imported under the tariff

quotas will enjoy the preferential tax rates. Goods on the list of those applying for import tariff

quotas without permits of the Ministry of Industry and Trade are subject to the out-quota tax rate.

No. Kinds of goods In-quota tax rate Out-quota tax rate (%)

1 Salt 13 – 30% 50 – 60 %

2 Tobacco raw material 30% 80 – 90%

 3 Poultry eggs 40% 80%

The Ministry of Industry and Trade shall grant import permits to eligible companies to

import goods on the list of tariff quotas, specifically as follows:

- Salt: Companies wish to use salt in production under the certification of specialized

management agencies.

- Tobacco raw material: Companies which have a cigarette production license granted by

the Ministry of Industry and Trade. Industry corporations will represent receive quotas

for member companies.

- Poultry eggs: Companies that have business registration certificates wish to import.

b. Discuss the different tax (tariff) rates applied on imported goods in Vietnam.

“A tariff, the simplest of trade policies, is a tax levied when a good is imported.”

(Krugman, Obstfeld and Melitz, 2015). The taxation is mainly based on 3 criteria: good

categories, certificates of origin, and free trade agreements. Vietnam mainly uses ad valorem

tariffs which means taxes levied as a fraction of the value of the imported goods. Some different

kinds of tax applied to imported goods in Vietnam are discussed as below:

- Preferential tax rates apply to imported goods originating from countries, groups of

countries or territories performing most favored nation treatment in trade relations with

Vietnam.

- Special preferential tax rates apply to imported goods originating from countries, groups

of countries or territories having agreements on special preferential import tax rates in

trade relations with Vietnam. Bilateral and multilateral trade agreements apply special
 preferential tax in Vietnam: ACFTA (ASEAN-China Free Trade Agreement), ATIGA

(ASEAN Trade In Goods Agreement), AJCEP (ASEAN -Japan Comprehensive

Economic Partnership), VJEPA (Vietnam Japan Economic Partnership Agreement),

AKFTA (ASEAN-Korea Free Trade Agreement.), AANZFTA (ASEAN Australia New

Zealand Free Trade Agreement), AIFTA (ASEAN-India Free Trade Agreement),

VKFTA (Vietnam-Korea Free Trade Agreement), VCFTA (Vietnam-Chile Free Trade

Agreement), VN-EAEU (Vietnam - EAEU Free Trade Agreement)

- The ordinary tax rate applies to imported goods that are not included in the above cases.

Ordinary tax rates are specified by 150% of the preferential tax rate of each

corresponding item. In case the preferential tax rate is 0%, the Prime Minister will decide

the ordinary tax rate.

- Excise tax is a tax levied on specific goods or services such as beer, wine, cigarettes, cars

with less than 24 seats and so on.

No. Products or Services Tax rate (%)

Products
1 Cigarette 70 – 75
2 Wine 30 - 65
3 Beer 55 - 65
4 Cars with less than 24 seats:
- cars with less than 9 seats 35 – 150
- cars having 10 to 15 seats
- cars having 16 to 24 seats 15

10
5 Motorcycle 20
6 Airplane 30
7 Yacht 30
8 Gasoline 7 – 10
9 Air condition 10
10 Playing cards 40
11 Votive items 70
Service
 12 Disco clubs 40
13 Massage, karaoke 30
14 Casino, electronic games with prizes 35
15 Betting business 30
16 Golf 20
17 Lottery 15

- Environmental protection taxes are indirect taxes on goods that can adversely affect the

environment, such as gasoline, oil, coal, plastic bags and so on. For example, plastic bags

are levied to a specific tax of 30,000 - 50,000 VND ($1.27 to $2.12) per kg.

- Value-added tax (VAT) is an indirect tax and is calculated on the added value of goods

and services arising from the process of production, transfer until reaching consumers.
 Cited Works

Krugman, P., Obstfeld, M. and Melitz, M., 2015. International Economics: Theory And Policy.

10th ed. Pearson Education Limited, p.252.

Vietnam Laws on Taxes and Importing.