PLASTIC INDUSTRY AT THE PROPOSAL OF INCREASING TAX ON PP 

Hyosung Vietnam Co., Ltd. has recently proposed to increase import tax on Polypropylene products (PP plastic beads in HS 3902 group from 3% to 6% and 6.5% for 02 HS codes 3902.10 and 3902.30).

According to the Vietnam Plastics Association, the supply of PP plastic materials in Vietnam is currently 850,000 tons/year (at full capacity) from three factories, including Binh Son Refinery and Petrochemical Co., Ltd (150,000 tons/year). Nghi Son Refinery and Petrochemical LLC (400,000 tons/year) and Hyosung Vietnam Co., Ltd (300,000 tons/year).

However, because Nghi Son Refining and Petrochemical Company have committed to export 300,000 tons annually abroad, the total PP production for domestic demand is only 550,000 tons/year in full capacity. 

Meanwhile, the demand for PP plastic in the Vietnam market in 2020 is more than 1.85 million tons and is expected to reach 2 million tons in 2021. Thus, enterprises have to find sources of imports from abroad.

If the import tax increases to 6%, the expected total costs of plastic enterprises will be extremely high. The amount of taxes that plastic enterprises importing from the Middle East, Japan, Korea, and China market is expected to be over VND 3,000 billion in the next 5 years.

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According to The Plastics Association, enterprises could buy PP materials from countries in the FTA region when the import tax increases. However, Vietnamese enterprises will not be able to buy PP materials at the same price as before (even though the import tax rate from this area was 0%), because the seller would raise the price corresponding to the price of the manufacturer countries outside the FTA area.

The costs that businesses have to pay for countries in the FTA region are expected to be VND 6,984 billion in the next 5 years (this cost cannot be collected by the State but by other countries in the FTA). FTA areas will benefit from this cost).

Thus, if the import tax is increased from 3% to 6%, domestic plastic enterprises will have to bear a huge additional cost for the next 5 years of VND 9,984 billion (3,000 billion + 6,984 billion). With this cost, plastic enterprises will not be able to invest and expand their business.

Also according to the Plastics Association, The increase in PP materials importing cost will lead to an increase in the price of PP raw materials since domestic PP materials yet meet the demand. As a result, product costs increase, making it impossible to compete with products imported from countries in Southeast Asia, Korea, China, and Japan.

Hence, the Vietnam Plastics Association proposes not to increase the import tax on PP materials to 6% and 6.5%, keeping the current import tax rate of PP plastic materials at 3%.

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