Gold mining company complains higher export tariff makes him suffer

Olympus Pacific Minerals Inc (OPM), the only foreign invested enterprise in Vietnam, which is allowed to mine and export gold in Vietnam, has expressed its worries about the newly made decision by the Vietnamese government to raise the export tariff on gold from zero to 10 percent.

The investment license granted to the company stipulates that the company has the right to exploit gold from Bong Mieu and Phuoc Son mines, and 100 percent of the raw gold must be exported to foreign countries under the mode of gold bullion. The company is now allowed to sell gold on the domestic market.

The new decision by the Vietnamese government to raise the export tariff on gold exports to 10 percent from the current level of zero percent, commencing from January 1, 2011, while aiming to stabilize the domestic market, will have negative effects on OPM’s business because the tax increase will make the production and export costs more expensive

“The new decision will accidently influence our business which in no way relates to the domestic gold market,” said James Hamilton, Deputy President of OPM.

According to him, foreign investors in mining industry have been facing a lot of difficulties already, including the tardiness in granting investment licenses, the poor infrastructure and the massive illegal exploitation, as well as the lack of a skillful labor force. The difficulties, together with the new tax rate, will present more difficulties for the company.

OPM has invested $80 million to develop the two forementioned mines. OPM said that if it has to pay the new tariff, it will bear double taxation, because OPM has fulfilled its commitments by paying natural resource tax and corporate income tax to the state. The representative of OPM complained that it decided to make investment in Vietnam because it was attracted by the low export tariff of zero percent. However, the unexpected tax increase may paralyze its business.

While OPM is now anxious about the new decision to increase taxes, other gold trading companies are not worried about the decision, saying that the new decision will not affect them in any way.

For example, the Phu Nhuan Jewelry Company (PNJ), the biggest jewelry exporter in Vietnam, said the new decision on raising export tariff on 99.99 percent gold jewelry will not have impacts on its business. It is because PNJ only exports 18K, 14K and 8K jewelry products. The company has exported $24 million worth of 10 million products so far this year, an increase of 42 percent over the same period of the last year.

Similarly, the new decision will not affect the operation of ACB Gold Centre, because the enterprise only exports 99.99 gold bars.

Under the new decision, the gold bars less than 99.99 percent gold will be taxed.

Contradictory comments have been raised about the new taxation. Nguyen Thi Cuc, Deputy General Director of PNJ, said that the decision will help control the market, thus helping ease the shortage and stabilizing the prices. For a long time, when the domestic price was lower than the world price, enterprises tried to export gold for profit. When the domestic market gets “hot”, the enterprises reason that the domestic shortage pushes prices up to levels much higher than world prices.

Besides, the new decision will also help prevent enterprises from “playing tricks”. Under the current regulations, enterprises must seek permission from the State Bank of Vietnam to export 99.99 percent gold bars. The enterprises, which do not receive quotas for exporting gold, then try to “dodge” the laws by exporting gold as jewelry products. In fact, the jewelry products they export are just preliminarily treated products. Since no barrier has been put on jewelry products, gold bars, declared as jewelry products, have been easily going through customs agencies.

“With the new decision, this will not happen any more, because from now on, 99.99 jewelry gold will be taxed at 10 percent,” Cuc said.

Meanwhile, some other businesses said the new decision will badly affect gold processing and export companies. Statistics show that in the last 12 years, Vietnam had imported 71 tons of gold. The huge asset is believed to be held and distributed among the population . “Once enterprises face the gold export limitation, they will lessen the demand for collecting gold from the public. If so, the large volume of gold will remain in the possession of general population and will not be put into circulation,” said Tran Trong Quoc Khanh from Asia Commercial Bank- VnExpress

Tags: vietnam gold, Vietnam gold exports, Vietnam gold market