Hanoi – The Vietnam Pepper and Spice Association (VPSA) has submitted an official petition to the Government Office, the National Assembly Office and relevant ministries calling for adjustments to the 5% value-added tax (VAT) applied to the pepper and spice sector.
VAT Creates a Costly Imbalance
According to VPSA’s calculations, the State collects only about 55 billion VND in VAT from domestic pepper consumption, while refunding over 2.1 trillion VND in VAT to exporters. In other words, for every 1 dong of tax collected, 39 dong are paid back in refunds—an inefficiency that VPSA says wastes social resources.
Key Proposals
To improve efficiency and support exporters, VPSA recommends that the Government and ministries:
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Apply a 0% VAT rate on raw materials used for exports, so exporters are not forced to pre-pay VAT and wait for refunds.
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Consider a fixed export tax of 0.5%, allowing the State to collect revenue at the time of transaction while giving businesses quicker capital turnover and avoiding delays in VAT refunds.
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Abolish the VAT refund mechanism for pepper and spice exports, since refunds are disproportionate to the actual tax collected and strain working capital.
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Maintain the existing 5% VAT only on raw materials intended for domestic consumption.
Financial Strain on Exporters
VPSA warns that the current VAT framework is creating significant financial pressure on pepper and spice companies, especially as global agricultural prices fluctuate and competition intensifies from major exporters such as Indonesia, India and Brazil.
Vietnam’s pepper and spice products are largely exported in semi-processed form, with profit margins of only 1–3%. Under these tight margins, a 5% VAT that must be reclaimed through slow refunds threatens the sustainable growth of the industry.