According to Decree No. 36/2015/TT – BTC effective from May 7th, gold jewellery product, craft and other gold products with gold content of 95% and above will received the exportation tax of 2%, instead of the current 0%.
The gold exportation industry in Vietnam which was already not a strong advantage, will now be neglected due to the inability to compete with foreign entities.
Hang about “home field”
Many jewellery business despite the goal to expand in exportation instead of the domestic market, still face many difficulties. The biggest hurdle is the gold price in Vietnam is higher than the world-price.
In current situation, jewellery corporations are not actively control of the raw material because of unable to export gold directly. Raw material was purchased from the unstable domestic market with high price. Besides, the quality of gold is still in questionable and was officially controlled. Unclear on gold “content” is a very popular issue which created a very difficult situation for Vietnam gold jewellery to compete with the World market.
Facing difficulty in material purchasing, many jewellery corporation only focused on the domestic market. The domestic market is more favored than “export” market. According to gold expert’s calculation, for every ounce of jewellery -gold sold, the jeweller can take in the profit of 1 million – 1.5 million VND. Moreover, other un-reputable jeweler, with “reduce gold content” can take in up to 2 million to 2.5 million VND / ounce
Despite the loss in gold bar trading, gold-jewellery retailers still continue to grow revenue by focusing strongly on the gold-jewellery market. For example, PNJ has seen a tremendous growth when focusing on this market. In the company’s 2015 annual stakeholders meeting, report showed that PNJ’s jewellery retail segment grow rate increased dramatcially from 14% in 2013 to 21% in 2014.
Mr. Nguyen Thanh Long, President of Vietnam Gold Traders Association (VGTA), believed that 36/2015/TT – BTC decree was only meant to hinder the forgery of gold jewellery materials. With most gold jewellery export products only have the gold content of 75%, and rarely reach the gold content of 95% – 99%, only limited products will be subjected to the 36/2015/TT – BTC decree.
Opportunities for exportation
However, according to Mr. Nguyen Thanh Long, when Vietnam joins the Trans-Pacific Partnership (TPP), the Vietnam Gold jewellery market will face fierce competitions. As a result, if the Gold jewellery companies do not improve their designs and product quality and do not expand to gold exportation, they will eventually be eliminated.
Facing with this challenge, Mrs. Cao Thi Ngoc Dung, Chairwoman of PNJ, shared that the company is importing equipment from Europe for producing Italy’s Jewellery products, and step by step replacing 60% – 70% of imported Jewellery from Italy in its product trade structure by year end and focus to exportation. However, not all gold jewellery corporations will move forward to face the challenge. Many experts believe that if the Central Bank of Vietnam allows the gold jeweller to import raw gold material, and established a more rigid policy on gold quality, the domestic companies will re-gain their competitive edge, heading toward exportation.
The government should establish a tax brackets for raw gold materials importation and a clear tax rate of raw gold materials importation of 0,3% – 0,5% (current tax rate is 1%),
Mr. Nguyen Thanh Truc, the General Director of Vietnam Argibank Gold Corporation Joint Stock Company, evaluated that by following the above suggestions, the Government will achieve 4 major milestones:
First, Tax revenue will grow due to the increase of exportation taxes from domestic companies. Second, a great number of cold jewellery corporations will join the exportation market, generate more revenue, will employ a large amount of skilled workers. Third, corporations will develop to compete with regional countries. Forth, it will contribute greatly to the fight against illegal gold trading through the borders which in result will help the Government to accumulate a large amount of foreign currency.
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