Chapter 3

Tariff barriers in
International Trade
M.s. Ngo Quynh Trang
 – Providing insights into the tariff tools applied in
international trade

– Analyzing the benefits, damages to the involved parties

from the application of tariff tools
– An overview of tariffs
Outline
Targets
– Export tariffs and their effects

– Import tariffs and their effects

– Effective protection rate

 – Export Tax Law, Import Tax Law (amended) No.
107/2016/QH13.

– Customs Law No. 04/2014/QH13. Tax Management Law 2019

LEGAL No. 38/2019/QH14.
DOCUMENT – Decree No. 134/2016/NĐ-CP detailing the implementation of
SYSTEM ON
some provisions of the Export Tax Law, Import Tax Law
EXPORT
AND IMPORT (amended).
TAXES – Decree No. 08/2015/NĐ-CP of the Government detailing and
implementing the Customs Law on customs procedures,
inspection, supervision, and customs control.
 – Circular No. 38/2015/TT-BTC on customs procedures; customs
inspection and supervision; export tax, import tax, and tax management
for exported and imported goods.

LEGAL – Circular No. 39/2018/TT-BTC amending and supplementing some

DOCUMENT provisions of Circular No. 38/2015/TT-BTC on customs procedures;
SYSTEM ON customs inspection and supervision; export tax, import tax, and tax
EXPORT management for exported and imported goods.
AND IMPORT
TAXES – Circular No. 60/2019/TT-BTC amending and supplementing some
provisions of Circular No. 39/2015/TT-BTC dated March 25, 2015, by
the Minister of Finance, regarding customs valuation of exported and
imported goods.
Formation and
Development Definition Roles
Process

Characteristics Classification Scope of

application

Overview
 Formation and Development Process

Value
-added
taxes
Taxes on
Sales
consumption
general
taxes

Other general taxes

on goods and
Consumption services
taxes
Excise
taxes

Taxes on
Customs and import
goods and
specific
duties
services

Taxes on specific
services
 Formation and Development Process
§ Taxes on exports and imports of goods may have started when ancient Phoenician merchants paid fees to
ship captains for the protection of their cargo, or when these merchants sailed through regions controlled
by ship captains.

– Taxes on exports and imports of goods were also used by the ancient Romans, who paid the government
in exchange for protection.

– Various taxes and fees for the government evolved into taxes on the exchange and transportation of
goods.

– The development of export and import taxes led to the growth of smuggling activities as tax evasion
provided a significant economic benefit.

– During the Middle Ages in England, export and import taxes were not used because trade with
continental Europe was not common
 Formation and Development Process
– The development of trade between England and continental Europe in the 13th century, along with the
strengthening of royal power and the need for funding the Crusades, created conditions for the revival of
export and import taxes.

– In the following centuries, export and import taxes became the primary source of revenue for monarchs.

– Other trading nations, such as the Netherlands, also used this type of tax.

– In the American colonies, the British used export and import taxes as a means to ensure direct trade with
England by imposing high tariffs on goods from other countries imported into the American colonies
making British goods more attractive to American consumers.
 Formation and Development Process
– The practice of levying high import tariffs to control trade was later adopted in the United States in the
19th and early 20th centuries through "protective" tariffs designed with high rates to restrict imports and
promote domestic goods consumption, rather than solely increasing government revenue.

– In Vietnam, within the context of an open economy, ensuring domestic competitiveness and the
sustainability of domestic businesses requires limiting the competitive abilities of imported goods
primarily through the use of customs tariffs as a significant tool.

– In the context of an expanding international economic environment and regional economic integration,
the current objectives of export and import tax policies are to effectively protect domestic production,
promote economic restructuring towards stronger export activities, ensure a reasonable revenue source
 Formation and Development Process
for the state budget in line with the tax reform process in Vietnam, and align with international
commitments regarding tariff reduction that Vietnam has signed and participated in.

1945-1954 1955-1965 1986-1990

• Occupied zone, • Encouraged • Tax law on
free zone Export import and export
• Export: tax-free • Limited import 1987
• Import: 116 • 435 items
items, ≥30%
 Formation and Development Process

• Tax reform step 1. • Tax reform step 3

• Import and export • Export-Import Tax 2011-Now
Tax law 1991 1996-2004 Law 2005
• Standard tax rate, • 6 methods of
• Preferential tax rate calculating the
(70% STR) price of imported
• Tax reform step 2 goods • Export-Import Tax
• Amended Export- Law 2016
• FTAs: ACFTA,
Import Tax Law AKFTA, VJEPA, • anti-dumping tax,
1998 VAFTA, VNZFTA anti-subsidy tax,
• Preferential tax rate safeguard tax
• Standard tax rate,
(not higher than
1990-1995 70% PTR) 2005-2010
• special preferential
tax rate
 Formation and Development Process
–Export and import taxes are indirect taxes (export,
import, VAT; người chịu thuế k phải là người nộp
thuế, là thuế hiệu quả hơn) levied on goods
Definition exported or imported across the borders of each
country.

Question: Are export and import taxes imposed on

SERVICES? No. Dịch vụ k có hàng dự trữ vì consume
và product xảy ra cùng 1 lúc
 Formation and Development Process

Tax liability = Tax base * Tax

rate

Characteristics
Formation and Development Process

Indirect tax

Import-
export
tax
Associated
with foreign
trade
Directly
influenced by
international
trade policies
 Formation and Development Process
– The state uses export and import taxes to regulate foreign trade activities by
influencing the price structure of exported and imported goods.

– => Export and import taxes are a component of the price of export-import
goods.

Indirect tax Taxpayers are those engaged in export and import activities; tax incidence is
the end consumers.

– Increasing or decreasing the export and import tax rates will directly affect
the prices of export and import goods, thereby influencing consumer
demand and choices, and compelling producers and importers to adjust their
business operations accordingly.

–
 Formation and Development Process
–

– Foreign trade activities play a significant role in the development of the

national economy; however, these activities require strict government
oversight.
Associated with
– Export and import taxes are an important tool used by the government to
foreign trade
control foreign trade activities through the declaration, inspection, and
taxation of export-import goods.

– The imposition of export and import taxes is usually based on the value and
type of exported and imported goods.
 Formation and Development Process
– Export and import taxes are a type of tax closely associated with foreign
trade activities (the basis of export and import taxes).

The value of goods is determined as the basis for calculating export and
import taxes, with the final value of the goods at the export border (for export
Associated with
taxes) and the value of the goods at the first entry point (for import taxes).
foreign trade
– The value used to calculate export and import taxes must accurately and
objectively reflect the actual transaction value of the exported and imported
goods.

– The fluctuations in the global economy and international trade trends in

each period will directly impact the exports and imports of countries,
 Formation and Development Process
especially in the current trend of trade liberalization, openness, and
economic integration.

Directly è As a result, international factors will directly influence the export and
import tax policies of each country.
influenced by
international – To achieve the set objectives, export and import tax policies must be

trade policies highly flexible and adaptable to the changing global economy and
international trade. Furthermore, these policies must be in compliance
with international agreements and commitments that each country signs
and participates in.
 Formation and Development Process
No. FTA Status Parties

FTAs in effect

1 AFTA Effective since 1993 ASEAN

2 ACFTA Effective since 2003 ASEAN, China

Directly
3
4
AKFTA

AJCEP
Effective since 2007

Effective since 2008

Protecting ASEAN, South Korea

ASEAN, Japan
5
domestic goods
influenced by
VJEPA Effective since 2009 Vietnam, Japan
6
7 AIFTA Effective since 2010 ASEAN, India

8
9 Roles
AANZFTA

international
VCFTA
Effective since 2010

Effective since 2014

ASEAN, Australia , New Zealand

Vietnam, Chile

10 VKFTA Effective since 2015 Vietnam, South Korea

trade policies
Vietnam, Russia, Belarus, Amenia, Kazakhstan,
11 VN – EAEU FTA Effective since 2016

Import-
Kyrgyzstan
CPTPP known Effectivesince30/12/2018,cameintoeffectinVietnam Vietnam,Canada,Mexico, Peru, Chile, New
12 Zealand,

13
(previously as
TPP)
since 14/01/2019
export taxes Australia, Japan, Singapore, Brunei, Malaysia

Effective in Hong Kong (China), Laos, Myanmar, Thailands,

AHKFTA ASEAN, Hongkong (China)
Singapore and Vietnam since 11/06/2019
EVFTA Effective since August 01, 2020 Vietnam, EU (27 members)
14 UKVFTA Effective since May 01, 2021 Vietnam, The UK
15 RCEP
Generate revenue
Effective since January 01, 2022
Regulate
ASEAN, China, Korea, Japan, Australia, New
Zealand
for the state international trade
budget activities
 Formation and Development Process
– When we talk about the role of protecting domestic production, we are
referring to import tariffs.

– Protective tariffs are imposed with the intention of increasing the price of
imported goods to reduce its competitive advantage over domestically
Protecting
produced goods.
domestic goods
è As a result, consumers will switch to using domestically manufactured
goods.

– The government imposes import tariffs, whether high or low, depending

on the level of protection for domestic products and international
commitments (cam kết).
 Formation and Development Process
– State protection for domestic products only helps domestic manufacturers
compete on price, but it does not improve product quality
competitiveness.

– In the long term, investing in technology innovation, improving

Protecting
management methods to enhance product quality, reducing production
domestic goods costs to increase competitive capacity in the international market is the
decisive factor

– It is difficult to distinguish between revenue-generating tariffs and

protective tariffs because tariffs inherently involve both protective and
revenue-generating elements.
 Formation and Development Process
– Protection of domestic production aims to support the development of the
manufacturing sector, create jobs, and generate domestic revenue.

– However, protection also reduces competitiveness, wastes resources, and

harms consumers.
Protecting
domestic goods è Therefore, choosing the industries to protect and determining the
appropriate protection period are of utmost importance.

– The objective of protecting through import tariffs is not a long-term strategic

solution, especially in the context of regional and global economic
integration today.
 Formation and Development Process
– The integration process involves reducing import tariffs, which will affect
state budget revenues and limit the protective role of import tariffs, thereby
creating competitive pressure on the domestic economy.

– Alternative solutions to import tariffs include:

Protecting 1. Applying Value-Added Tax (VAT) and Corporate Income Tax (CIT) to
domestic goods imported goods (where VAT and CIT may overlap with import tariffs).

2. Providing preferential Corporate Income Tax (CIT) to incentivize

investment.

3. Utilizing other non-customs tools.

– Import tariffs, with flexible tariff rates, play a role in regulating
imported goods by preventing, restricting to a reasonable extent, or not
 Formation and Development Process
restricting at all, depending on the type of goods, their origin, and the
nature of bilateral or multilateral trade relationships.

– Regulating the trade balance through import tariffs helps a country

Regulating maintain trade balance and save foreign currency spent on imports, while
international increasing foreign currency earnings from exports. This, in turn,

trade activities contributes to building up foreign exchange reserves, particularly for less
developed countries.

– The regulation of the quantity of imported goods also helps to balance the
supply and demand of goods in the domestic market, thereby contributing
to price stability.
 Formation and Development Process
– Like other types of taxes, tariffs contribute significantly to government
revenue.

– The contribution of tariffs to total government revenue varies depending on

each country and different periods.
Generating
revenue for the – Importantly, the share of import tariffs in government revenue is often higher
state budget in developing countries (Why?).

– The revenue from tariffs is directly influenced by the trade volume. In this
context, the revenue from tariffs is directly impacted by economic growth.

– Therefore, when designing tariff policies, we need to focus on the goal of

economic growth rather than leaning towards the objective of increasing government revenue.
 Formation and Development Process

Export tax

Classification
Goods flow

Customs
Transfer Pricing Import tax
Tax
 Formation and Development Process

Ad valorem tax

Classification
Ad valo: thuế tỉ lệ,đánh
Scope
tl theo gtri sp of
Spec:application
đánh thuế theo số Taxation
lượng (oto cũ được phân method
loại,..)
Mixed Specific tax
 Formation and Development Process

Taxpayer yer
Taxable entity

Non-taxable entity (cá

thể k bị đt):

7 groups:
 Formation and Development Process
1. Exporters, importers of goods.

2. Organizations authorized to engage in export or import.

3. Individuals departing or arriving with goods being exported or

Taxpayer imported, sending or receiving goods through Vietnam's
border or customs checkpoints.

4. Persons authorized, guaranteed, and tax agents for taxpayers:

(a) Customs procedures agents, in cases where authorized by taxpayers to pay
export tax and import tax.
 Formation and Development Process
(b) Enterprises providing postal and international express delivery services, in
cases of tax payment on behalf of taxpayers.

(c) Credit institutions or other organizations operating under the provisions of

the Law on Credit Institutions, in cases of guarantee and tax payment on
behalf of taxpayers.
Taxpayer (d) Persons authorized by cargo owners in cases of goods being gifts from
individuals, advance shipments, post-trip luggage of departing or arriving
individuals.

(e) Branches of enterprises authorized to pay taxes on behalf of the

enterprises.

(f) Other persons authorized to pay taxes on behalf of taxpayers as prescribed

by law.
 Formation and Development Process
(5) Buyers and carriers of goods within the tax-exempt limit for border
residents, who do not use them for production or consumption but rather
sell them in the domestic market, and foreign traders are permitted to
conduct export and import business at border markets as regulated by the
law.
Taxpayer
(6) Persons having exported and imported goods that were initially not
subject to tax or were exempt from tax but later experienced changes and
became subject to tax as stipulated by the law.

(7) Other cases as provided by law.

Company A delegates to Company B for the import of an ultrasound machine
valued at 35,000 USD. The import tax rate is 10%.
 Formation and Development Process
- Who is the taxpayer for the import tax?

- Should the import tax documents be under the name of company A or

company B?

Taxable
Taxpayer
entity
 Formation and Development Process

Taxable entity

Goods permitted for Goods areactually

import and export by state engaged in import and
authorities export

4 groups:
(1) Goods exported and imported through the Vietnam border and customs gates.
 Formation and Development Process
(2) Goods exported from the domestic market to the non-customs zone and
goods imported from the non-customs zone into the domestic market.

(3) Goods exported and imported on the spot.

(4) Goods exported and imported by businesses exercising export rights,

Taxable entity import rights, and distribution rights

– In principle, export and import taxes are only imposed on actual exported or
imported goods.

– Therefore, cases where

 Formation and Development Process
+ Foreign goods merely pass through Vietnam's borders or territory without
being consumed in Vietnam

+ When imported goods are not intended for commercial use (only for
personal consumption)
Non-taxable
entity Will not be subject to export or import taxes.

4 groups:
(1) Goods in transit, in transit, or transshipment.

(2) Humanitarian aid goods, non-refundable aid goods.

 Formation and Development Process
(3) Goods exported from a duty-free zone to a foreign country; goods imported from abroad into a duty-
free zone and only used within the dutyfree zone; goods transferred from one duty-free zone to
another.

(4) Petroleum used to pay resource taxes to the State when exported.