Opportunities and Challenges of International and Regional Economic Integration for Vietnam's Foreign Trade

(Over 500,000 USD still requires approval from the Ministry of Commerce to be imported). The policy on managing equipment imports is not closely monitored, and there is still a situation of importing outdated technology equipment, and the efficiency of using imported equipment is low.

* Regarding tariff instruments : Vietnam's tax policy system has been amended and supplemented many times to suit the requirements of integration, but up to now, it still reveals many unreasonable things that hinder the development of the economy and the economic integration process of Vietnam. The inappropriate points in the current tax policy are:

Tax rates are too widely spread and there are too many tax levels. One of the reasons for this situation is that we do not have a clear strategy for developing some key sectors, only aiming to protect the state-owned economy, or protect the local interests of a sector, without aiming to create, nurture, and support the exploitation of comparative advantages.

Each tax also contains unfairness and inequality.

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equality between different taxpayers:

Currently, the special consumption tax stipulates tax exemptions for automobile assembly facilities and beer production facilities that make losses, and applies different tax rates to domestic and foreign products. For example, filtered cigarettes produced from imported materials have a tax rate of 70%, while those produced from domestic materials have a tax rate of 52%; imported automobiles have a special consumption tax rate of 100%, but domestically produced automobiles have a tax rate of 5%. These principles violate the WTO's national treatment principles.

Regulations on tax incentives for overseas Vietnamese when investing in Vietnam violate the non-discrimination provisions in the Double Taxation Avoidance Agreement that Vietnam has signed with other countries.

The tax policy system still has many points that are not consistent with international practices and do not ensure compatibility with the systems of countries in the region.

+ The value added tax (VAT) rate of imported goods in our country is high or low based on the purpose of use of the goods and not on the nature of the goods, which is contrary to international practice.

+ The regulation allows for the fictitious deduction of input VAT on agricultural and aquatic products purchased directly from farmers to support the agricultural production sector which is facing difficulties, while ensuring the continuity of the VAT law. However, the fictitious deduction of input tax currently based only on the list is unscientific, inaccurate, and does not ensure the transparency of the tax law.

+ The continued extension of the tax incentive period for foreign investment is inconsistent with the fact that countries do not accept the extension of the application period of tax deduction measures in the double taxation avoidance agreements signed with Vietnam as well as the countries that have been negotiating with Vietnam. This measure not only causes damage to the state budget but also does not bring about the effectiveness of attracting foreign investment to Vietnam.

The tax system is still too complicated, not meeting the requirements of simplicity, clarity and transparency according to the principles of international economic integration. On the basis of that principle, there are timely measures to deal with unfair treatment in trade relations.

Taxes are used to serve many different social policies, which loses its neutrality and goes against the principles of simplicity, clarity, and transparency within the framework of international organizations that Vietnam participates in. For example, the policy also stipulates too many different tax exemptions and reductions. The reason is that the tax policy system aims to both ensure revenue for the State budget and implement policies to encourage economic development of sectors, regions, and territories.

The tax system has many loopholes that have created conditions for commercial fraud.

- Taking advantage of tax calculation prices. When goods are imported into Vietnam, the management agency only bases on the contract value, goods records and minimum price list to calculate import tax for that type of goods. In case the price

If the contract price is lower than the price stated on the minimum price list, the state budget will have tax based on the minimum price list. Some enterprises have taken advantage of this regulation to declare the value of goods lower than or equal to the price stated on the minimum price list.

for commercial fraud, tax fraud.

- Taking advantage of import tax regulations. The list of taxable items of the current import-export tax schedule is built on the basis of the List of Import and Export Goods of the World Customs Cooperation Council (HS). However, at the detailed level, the names of the items are not accurate, the criteria for classifying goods have not been selected in accordance with the nature, characteristics, structure, etc. The owners often take advantage of these loopholes to commit commercial fraud.

- Taking advantage of the used goods regime: According to regulations, the taxable price for used goods allowed to be imported is 70% of the price of new goods of the same type. Many owners have imported new goods but declared them as used goods to evade taxes.

- Taking advantage of preferential tax payment deadlines, many businesses have tried to find ways to misappropriate tax money, prolonging the situation of debt arrears.

- Due to preferential tax policies for export production, businesses

Import tax and VAT are deferred for 270 days, and in many cases, customers are allowed to owe money for raw materials until they export and then settle and deduct. Meanwhile, if you buy domestic raw materials, you have to pay and pay VAT, which explains why some processing enterprises have imported even nylon packaging, carton boxes, and hangers. As a result, tax policies have limited the increase in domestic content in exported products.

- Commercial fraud through false declaration of quantity and weight of goods: in reality, some businesses have used tricks to import large quantities but declare small quantities, import high-priced goods but declare low-value goods, and declare separate components as whole...

- Commercial fraud through intentionally misrepresenting the origin of goods, in the following cases:

+ For the same item, if produced in ASEAN, Taiwan, Hong Kong, etc., the taxable price is only 70% compared to the item produced in G7 countries.

+ Because the origin of goods is directly related to preferential policies between countries granting each other MFN status, or the origin of goods is related to tax incentives for some items enjoying special preferential tax rates under the agreements.

+ Commercial fraud through customs procedures for transit goods: Taking advantage of the regulation that imported goods are allowed to be transited, which means goods that have an import license but have not completed customs procedures at the place of import gate and are transferred to the customs of another province or city.

In order to check, collect taxes and complete customs procedures, the owners of goods declared incorrect names, weights and quality of goods.

+ Commercial fraud in the field of export goods processing: Procedure

The units import a lot of raw materials and accessories for processing, but in reality they do not export all of them, but instead declare an increase in the raw material and accessories quota for processing. Thus, there are some excess products for domestic consumption.

tax evasion

* Non-tariff instruments : Vietnam's current non-tariff system, in addition to its positive aspects, still has some limiting effects on the production development of some national economic sectors. Specifically as follows:

- Unequal competitive environment, and reduced competitiveness of protected goods: The policy of quantity restriction has separated the domestic production of protected products from the world production process, because the product price has been distorted. Thus, important signals and the best opportunities for production and consumption are not conveyed to domestic producers and consumers. Resources continue to be

used in industries where international competitiveness is actually much weaker.

- Limiting the ability to attract investment capital: Commodity prices are one of the important signals that help investors, producers and consumers decide their behavior. The allocation of quotas has distorted prices, affecting investors' decisions about Vietnam.

Policies and measures to support export activities have not been effective when an export item experiences price fluctuations in the world market, and these policies have not created

conditions for businesses to export new products, or stimulate the search for new markets.

Development Support Funds and Export Support Funds have not been established yet.

Stable distribution channels have not encouraged the formation and development of stable "key" markets for export products with competitive advantages. Up to now, a large proportion of Vietnamese goods must be exported through intermediary companies, partly because these funds have not been effective in finding direct export partners. Thus, Vietnamese export products will inevitably depend on foreign countries and reduce the effectiveness in improving competitiveness in the world market.

* Exchange rate tools: The implementation of some exchange rate measures has revealed issues that need to be considered and researched to find appropriate solutions.

- The exchange rate is built close to the market, which is a suitable policy but has not been closely coordinated with the foreign exchange management policy. In reality, there are many underground foreign exchange circulation channels that are beyond the control of the Government. Currently, a large amount of foreign currency is brought into Vietnam through non-commercial channels, the circulation of foreign currency is quite free in the market as a "second currency". This significantly affects

exchange rate correlation, reducing the role of exchange rate adjustment measures to stabilize the economy and society.

- Although the exchange rate is close to the market, the grasp, synthesis, analysis and evaluation of information on foreign exchange situation is still slow, so the exchange rate adjustment is not timely, complete and accurate. Therefore, the

introduce a guiding and leading exchange rate policy that is lacking in initiative.

dynamic and inefficient

- The exchange rate between VND and USD changes slowly, which is not beneficial for the economy, for the external strategy, especially for encouraging exports. The official exchange rate often increases lower than the inflation rate, creating a gap and not fully promoting the stimulating function of the exchange rate.

The reasons for the above-mentioned shortcomings of foreign trade policy tools are: due to the influence of closed-door policies, the economy has been stagnant and backward for a long time. That has left bad consequences for all economic sectors: Firstly, the level of economic development of our country is still low, and integration into the regional and world economy is still quite confusing. The management apparatus for tax and non-tariff tools, although having made many efforts to closely follow the practical situation, is still generally quite passive and stagnant. The coordination between departments, sectors, localities, and between management institutions has had positive changes but still does not meet the requirements, sometimes rigid and overlapping, sometimes loose and inadequate, and the team of qualified management staff is still lacking.

Chapter III‌‌

Vietnam's foreign trade prospects and some policy recommendations

3.1 . Opportunities and challenges of international and regional economic integration for Vietnam's foreign trade

3.1.1 . Opportunity

International and regional economic integration means accepting the rules of international economic institutions. Vietnam's institutions and policies will be

Adjusting to international standards and practices will contribute significantly to establishing and strengthening the trust of foreign partners and expanding Vietnam's foreign economic relations.

International economic integration is an opportunity to create conditions to promote the domestic reform process; to have conditions to acquire techniques, technology, management experience, and take advantage of cheap labor and labor with high intellectual content to

Promote export of goods, use capital and high technology of other countries to build infrastructure and exploit minerals.

International economic integration is a process of cooperation on the basis of mutual benefit, in which countries give each other preferential treatment on the basis of respect and acceptance of international laws and practices. GATT (now WTO) has affirmed

this goal and places particular emphasis on the elimination of discrimination.

Discrimination in trade relations hinders the development of the world economy. Integration into the global economy will create conditions for Vietnam to avoid isolation, discrimination or oppression in economic relations, gradually building its position and power in the international market.

International economic integration will enable domestic enterprises to expand their markets due to the most favored nation (MFN) status, national treatment (NT) and the benefits of eliminating tariff and non-tariff barriers. Integration will help Vietnam effectively exploit its comparative advantages. In addition

In addition, businesses can benefit by taking advantage of special incentives and exemptions available to developing countries.

International economic integration is an opportunity for Vietnam to participate in establishing and perfecting international "rules of the game" to create a solid position in foreign economic relations, thereby having the conditions to promptly grasp international trends and developments.

Adjusting foreign economic policies of countries to adjust their foreign economic relations.

3.1.2. Challenges

The most serious challenge is the gap in economic development level, which is "far behind" compared to many countries in the region because Vietnam's starting point is too low. The competitiveness and dynamism of the economy are still weak; the economic structure and investment structure still have many irrationalities, the market mechanism is not operating smoothly. The financial - monetary - banking system is slow to innovate. Infrastructure is still lacking and weak such as: roads, seaports, information network systems, internet, telecommunications equipment systems ... the level of science and technology is backward, the reform of state-owned enterprises is slow; business thinking and management are not dynamic. The legal system is not complete. Law enforcement and handling are not strict . To integrate effectively, Vietnam must have the strength to overcome its own obstacles.

International and regional economic integration Vietnam must gradually remove tariff and non-tariff barriers. Enterprises must face increasingly fierce competition on a global scale; affected by fluctuations in international prices, bank interest rates...

Although there are still many development resources, the environment and the mechanism for allocating and promoting resources have not really met the requirements. Resources are spread out. The output of some key export products (mainly agricultural products) has reached its limit, and new policies are needed to create new momentum.

Receiving aid for Vietnam is also a challenge that requires great efforts in planning and management requirements and staff qualifications.

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