Abstract
The study assesses the impact of tariff reductions on fluctuations in customs revenues in Vietnam. The collection of research data was based on the official sources, namely the Government’s Web Portal and the World Bank’s website, and took place between 2002 and 2017. This paper uses the LASSO (Least Absolute Shrinkage and Selection Operator) linear regression model to estimate and predict the relationship of data series, thereby drawing a regression equation to consider the impact of various factors on customs revenues. The results have proven that tariff reductions have no negative impact on customs revenues. When tariffs are reduced, import turnover increases, the level of compliance with tax laws by import-export enterprises increases, and smuggling and trade fraud decrease. Based on these conclusions, the paper proposes several policies aimed at ensuring future customs revenues in Vietnam. As follows from the findings provided below, in order to ensure customs revenues, the Vietnamese Government should introduce appropriate policies to improve the efficiency of customs management in Vietnam; envisage accurate planning and reasonable investment for the customs office in terms of facilities and human resources; establish reasonable non-tariff barriers to prevent fraud and abuse causing losses in customs revenues.
Highlights
Right after officially joining WTO in January 2007, Vietnam set to actively implement its commitments on tariff cuts with a reduction of 1.812 import tax lines at an average reduction rate of 14.5%
Vietnam will inevitably have to continue to reduce tariffs following the free-trade commitments. From this perspective, predicting the tariff reduction effects exerted on customs revenues will be of great significance for Vietnam in the near future
This paper aims to consider the tariff reduction impact on customs revenues in Vietnam by utilizing the LASSO linear regression method for data samples from the first quarter of 2002 to the fourth quarter of 2017
Summary
Right after officially joining WTO in January 2007, Vietnam set to actively implement its commitments on tariff cuts with a reduction of 1.812 import tax lines at an average reduction rate of 14.5%. Free trade commitments entered the stage of more aggressive tariff reduction. Both the US-Vietnam Bilateral Trade Agreement (BTA) and the new-generation free trade agreements (FTAs), such as the EU-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), are expected to prove efficient shortly. Vietnam’s customs revenues will sharply decline due to tariff reductions, and it will be necessary to increase domestic revenue sources. The Vietnam Government should implement personal income tax regulations, which may offset the shortage of import and export taxes. The total state budget is still capable of growth and a positive balance sheet
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