The Ministry of Finance (MoF) has drafted legal documents to fulfil Vietnam’s commitments on import tariff cuts under free trade agreements (FTA) the country has signed with partners, said MoF Minister Dinh Tien Dung. 

Pressure is growing on domestic industrial production as Vietnam is committed
to cutting import taxes under FTAs. (Photo: thoibaokinhdoanh.vn).

Vietnam has signed more than 10 bilateral and multilateral FTAs with foreign partners, and undoubtedly these deals offer a great chance for the country to boost exports. Yet, under these FTAs Vietnam is committed to slashing tariffs on imports, thus causing a big loss of revenue to the state coffers.

Notably, unlike previous FTAs, new generation FTAs such as one between Vietnam and the European Union (EVFTA) or the Comprehensi9ve and Progressive Agreement for Trans-Pacific Partnership (CPTPP), require a higher level of commitments regarding the opening of the market for goods, services and investment, as well as a shorter time for tariff cuts.

The EVFTA is a case in point. Under the trade deal, the EU is scheduled to eliminate about 85.6% of its tariff lines on Vietnamese exports when the deal takes effect, and the figure will rise to 99.2% after seven years of implementation.

Similarly, 48.5% of tariff lines on EU exports to Vietnam will be eliminated following the enforcement of the trade deal, and the figure will rise to 91.8% after seven years.

Indeed, the EVFTA took effect as of August 1, 2020.

According to Finance Minister Dinh Tien Dung, the financial sector has put in place State budget restructuring solutions aimed at limiting the impact of the implementation of tariff reduction commitments under FTAs.

The MoF has drafted legal documents to fulfil Vietnam’s commitments and the tax commitment roadmap will be implemented step by step to ensure production and business activities are not shocked, Dung told VTC News.

He went on to say the financial sector will continue to accelerate the administrative reform and modernization process at tax and customs agencies, creating conditions for businesses to operate and enjoy preferences from FTAs.

Vietnam has signed bilateral FTAs with Chile, the Republic of Korea, the Eurasian Economic Union, the European Union, and the United Kingdom. It has also inked multilateral FTAs with ASEAN, ASEAN-China, ASEAN-the Republic of Korea, ASEAN-Australia-New Zealand, ASEAN-India, ASEAN-Japan, ASEAN-Hong Kong (China), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and the Regional Comprehensive Economic Partnership.

It is currently negotiating FTAs with Israel and the European Free Trade Association.