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Hanoi, Vietnam, April 18 – 20, 2007
Researches, Country Studies, Ideas and Fellowship The Fourth Asia Tax Forum in Hanoi, Vietnam was a big success! More than a hundred participants from government, the academe, and industry came to share researches, best practices, and developments on indirect taxation. Senior government officials, members of the academe, and industry leaders presented papers that reflected expertise and experience. Nobody could believe that it was the first time for the Ministry of Finance of Vietnam to host a regional conference. The preparations and the conduct of the forum were certainly world class. The attention to details and perfection by the Ministry officials and staff was impressive.
Senior government officials from Cambodia, China, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Thailand,  and Vietnam, participated in the 2007 Forum. Chinese Taipei also sent delegates to the conference. Members of the academe who are tax experts added depth to the discussions: Prof. Lee Burns, University of Sydney; Prof. Joosun Jun, Ewha University, Korea, and Prof. Stephen Phua Lye Huat, National University of Singapore. International institutions such as the International Monetary Fund were represented.
The Vice Minister of Finance, the Hon. Truong Chi Trung welcomed the participants through a sumptuous dinner. He formally opened the conference the following day and said that it was a big honor for the Ministry of Finance to host the Forum. The Ministry also considers it as a valuable opportunity for learning and fellowship. As a form of appreciation, Prof. Stephen Phua of National University of Singapore presented the book Excise Taxation in Asia to the Vice Minister, and Mr. Dan Witt, President of International Tax and Investment Center (ITIC). The book contains the studies which were presented in the conference on Excise Taxation in Singapore in 2004.
The technical sessions were ushered in by Mr. John Norregaard of the IMF who presented a paper on the “Fiscal Interrelationship between Import Duties and Indirect Taxation”. He noted that trade liberalization may have enhanced growth through improved trade flows. However, the reduction of tariff rates has reduced revenues of government. He cited countries like Malawi, Senegal and Jordan that successfully confronted this problem through increased collection from the VAT and excise taxes. He stressed the importance of strong political commitment to tax reform, base broadening, and improvement in tax administration. Dr. Rochananonda from the Ministry of Finance of Thailand affirmed the growing importance of indirect taxes. They can compensate for the loss of tariff income without affecting income distribution. The representative from Vietnam emphasized the need for a comprehensive approach to tax reform instead of incremental changes.
The next session focused on developing a research agenda on Tax Expenditures. Mr. Adrian Cooper defined tax expenditures as relief from standard rates through tax exemption, reduced tax rates, and deferral of tax obligations. He noted that tax expenditures do not promote equity, efficiency, transparency and simplicity of the tax system. Thus, it will be useful for governments to measure the magnitude of their tax expenditures. The traditional approach is to measure revenue foregone or the amount by which public revenues would rise if economic activities were taxed at the normal rate. This requires comparing revenues from the use of preferential tax rates with revenues if “benchmarks” or average rates were imposed. The other approach is to estimate the actual amount by which revenues would rise if tax expenditures were withdrawn. The participants expressed interest on a regional study that can enable governments and industry to better understand the amount of subsidies that have been given through concessionary taxes.
Drawing from his experiences in designing and drafting VAT laws in developing countries, Prof. Lee Burns examined recent developments in the design of exempt supply treatment of financial services, particularly the treatment of explicit fees, apportionment of input tax credits, measures to counter “in-sourcing” and reverse charging for foreign services acquired by suppliers of financial services. These include the use of proxy taxes, the “Better Alternative Tax” (that was considered in the Philippines) the Israel- addition method, and, the New Zealand approach. The latter provides zero-rating of financial services supplied to registered persons. To qualify for zero-rating, the registered person must predominantly make taxable supplies (other than zero rated financial supplies). Prof. E. Aguirre from the Philippines informed that the Philippines attempted to impose a VAT on financial services but eventually reverted to the use of a gross receipts tax (GRT) on financial transactions. The VAT increased the cost of fund. Former Finance Secretary of the Philippines, Mr. De Ocampo said that practical considerations limited the attempt of government impose a VAT on financial services in 1997.
 Dr. Emil Sunley walked the participants through recent developments in the excise taxation of tobacco in the Asia Pacific region. He noted a growing trend towards the adoption of specific taxes, i.e. 19 out of 27 countries use specific taxes. Since prices are not controllable in competitive markets, taxes that are based on value have become more difficult to administer. A strong case can also be made for specific taxes if the goal is to discourage cigarette consumption. Mr. Sunley showcased the indexation of tax rates in Australia and New Zealand as a way of enabling specific tax rates to keep pace with inflation.
Former Finance Secretary R. de Ocampo presented a colorful history of taxes on non-essential commodities. Excises on luxury goods are considered proxies for taxpaying capacity and may have a role in improving the progressivity of the tax system. The tax can also be used to compensate society for negative externalities from the consumption of harmful goods. It is important however for the tax to be efficiently structured and administered. Otherwise, the tax may have a regressive character.
The last paper was presented by Prof. Lye Lin Heng of Singapore on energy and environmental taxation in Asia. She discussed that tax policies can reduce harmful emissions, reduce health risks, raise revenues to finance services to improve the environment, and, change consumption patterns towards the use of energy saving vehicles and devices. She cited the success of the “Area Licensing Scheme” in Singapore in reducing traffic. However, ownership of vehicles is still rising and there may be a need for a vehicle quota system, an increase in registration fees and a road user’s tax. Mr. Le Xuang Trung of Vietnam noted the need to amend existing laws of Vietnam towards protecting the environment. In certain cases, the rates are insufficient to compensate for the harm done to the environment. For example, the excise tax on cars is not structured to minimize the pollution problem.
The presentation of country papers was highlighted by the paper on “New Perspectives on Tax Policy for Developing Countries: the Case of Korea” by Prof. Joosung Jun. He cited changes in the Korean tax structure especially after the 1997 financial crisis. The performance of the personal income tax has slackened due to base erosion resulting from the provision of more allowances to wage earners. The base broadening of the corporate income tax due to increasing profitability of firms has compensated for this somewhat. Revenues from customs duties have been falling due to trade liberalization but the VAT has been a stable revenue-source of government. He cites the need to further expand bases, primarily because of the ageing population and the potential costs of unification and self-defense. The other urgent tasks are the reform of the financial sector and information sharing among government agencies to promote better compliance to tax laws.
A beaming ITIC President of ITIC, Mr. Dan Witt presided over the concluding ceremonies and announced the forthcoming activities of the forum:
- An excise tax handbook for Asia
- Upgrading of the website for the Asia Tax Forum which will feature papers and researches on taxation. The website will have an interactive forum for sharing of questions and information...
- Organization of the researches and discussion made in the Vietnam forum into a book.
Mr. De Ocampo suggested that support from regional organizations such as the ADB may be explored for developing the Asia Tax Forum as a mechanism for capacity building and the conduct of regional researches on taxation. He identified other areas that the Forum can discuss: tax expenditures, improvement of tax administration and governance; and phasing-in of tax reforms.
Mr. Hafiz, Advisor of ITIC informed that the Forum will undertake a regional study on tax expenditures for distilled spirits, as well as a study on the taxation of financial institutions. He mentioned a possible cooperation between ITIC and the Singapore Center on Environment with respect to a conference on environmental taxation.
The participants enthusiastically endorsed the conduct of the Fifth Asia Tax Forum in 2008... The Indian delegation graciously accepted the challenge to host the ATF in 2008. Mr. J. M. K. Sekhar of the Central Board of Excise and Customs gave a warm welcome to the delegates by saying: “See you all in Delhi.”
The dinner hosted by Hon. Nguyen Van Ninh, Director General of the General Department of Taxation was as memorable as the forum itself. The dinner in honor of the delegates was held in an exclusive restaurant fronting a picturesque river. The food and music were excellent. The band using traditional Vietnamese instruments such as bau monochord serenaded the participants. Upon the request of the ladies from the Ministry of Finance of Vietnam, Former Secretary Roberto de Ocampo sang a Cebuano song a cappella. The Director General showed his singing prowess as he sang a Vietnamese song accompanied by the two ladies from the Ministry. Professor Lye Lin Heng of Singapore sang “Those were the days” as a fitting end to the celebration. |
