Vietnam-made woodwork tired of Russia’s taxes

According to the HCM City Handicraft and Wood Industry Association (HAWA), Vietnam exported $733 million of fine arts and handicrafts to Russia’s market in the first five months of the year, and over $2.1 million of woodwork products in the first seven months of 2008.

Also in the first seven months of 2008, the limber materials imported from Russia to Vietnam had reached $717,342 in value, which seems like nothing in comparison with the $1 billion worth of material imports to Vietnam in 2007.

Explaining the low exports of Vietnam-made woodwork to the market, Huynh Van Hanh, Deputy Chairman of HAWA, attributed the low trade turnover to the tax rates imposed by Russia on woodwork imports.

Currently, Russia calculates tax based on the weight of the imports, with the import tax rate of Euro 1,300/tonne, and 18% in VAT on the minimum price of $5,000/ton.

“Vietnamese enterprises know the Russian market, but not one of them can bear the taxes,” said Huynh Quang Thanh, General Director of Hiep Long Woodwork Company.

Due to the high tax, there exists a big gap between the retail price and FOB price, with the former price always at five times higher than the latter. In European countries, the figure is 3.5, while in western European countries, it is 4.

However, Plyshevskiy Michail, Chairman of the Sverlopsk Woodwork Association, said that Vietnam and Russia can still cooperate to earn money from woodwork products. Russia only imposes high taxes on finished products, while semi-finished products can enjoy import tax incentives, as the VAT tax is calculated based on the value written down in the contracts.

Therefore, it would be better to export products apart. Production phases will be carried out in Vietnam, while enterprises in Russia will assemble the finished products. The more than 700,000 Vietnamese people now living in Russia will serve as a good bridge for Vietnamese companies to penetrate Vietnam’s market.

Russia now has 142 million people, with a GDP per capita at $9,075/per capita/year. Russia is considered a nation with a high level of urbanization. Every year, woodwork imports account for over 43% of total consumption demand of Russian people.

On the days between December 1-5, 16 Russian companies, the woodwork production and distribution companies had a working session in HCM City in hopes to find suitable partners.