Difficulties in both input and output
Exports decreased by nearly 12% in the first months of this year, in which industries such as textiles and footwear decreased by 19.3% and 16.3% respectively… causing the consumption of packaging paper products, which account for 85% of the total output of the entire paper industry, to also decrease. In that context, “most businesses in the industry only maintain a capacity of 50-65%”, a representative of the Vietnam Pulp and Paper Association (VPPA) confirmed. With this capacity level, businesses can only maintain operations, including paying interest on loans, workers’ salaries and cannot make a profit.
The difficulties of the paper industry are expected to last until the end of this year and possibly longer due to the global economic recession and reduced demand. Only when the manufacturing industries restore orders, will paper enterprises have a chance to “overcome the bottom”.
However, the difficulties of the paper industry are not only a consumption issue; Mr. Dang Van Son, Vice Chairman and General Secretary of VPPA, said that enterprises in the industry are eager to promote the recycling of used paper, aiming at circular production. However, recycled paper enterprises purchase scrap paper as raw materials for production from scrap dealers, level 1 and level 2 collectors… so most of them do not have invoices, sellers cannot issue invoices or use invoices of unknown origin to provide to purchasing enterprises. This creates great difficulties and risks for enterprises in proving origin, and will be severely punished, such as not allowing VAT refunds; not included in production costs and late payment penalties when the tax authority detects illegal invoices.
Currently, the General Department of Taxation has allowed paper enterprises to make invoices but not exceeding 100 million VND; this amount is too small compared to the centralized purchasing needs of many enterprises, so enterprises continue to face difficulties.
Mr. Son cited an example, a medium-sized packaging paper production enterprise with a capacity of 50,000 tons/year and assuming 50% of raw materials collected domestically and 50% imported, will need about 30,000 tons of domestic recovered paper materials (OCC) each year. The average price of OCC is about 4,000,000 VND/ton, so the enterprise needs invoices worth 120 billion VND. If a list has a maximum value of 100 million, at least 1,200 lists are needed. As a result, businesses spend a lot of time every month and it is almost impossible to find a way to rationalize the purchase of raw materials if they want to avoid the risk of using illegal invoices.
Hope to pay VAT instead of scrap purchasing source
Currently, the production capacity of businesses in the paper industry is up to 8 million tons/year and is expected to increase by about 3 million tons by 2025. However, the fact that businesses are only operating at about 50-60% of their design capacity clearly shows that their efficiency is not high, causing waste of investment resources.
To solve the difficulties for businesses in the industry, VPPA – representing about 130/500 businesses in the paper and pulp industry but accounting for 90% of the industry’s total output – recommends that there should be solutions to help businesses solve the capital problem. The issuance of Circular No. 02/2023 by the State Bank on debt repayment restructuring, along with interest rate cuts, will help businesses have working capital to continue production, but it is necessary to continue considering further interest rate reductions. In addition, the Government needs to consider continuing to issue policies to extend or exempt taxes and land rents.
Currently, the paper industry has not yet secured raw material sources for sustainable development; there are no large-scale commercial pulp production enterprises, so they have to import more than 500,000 tons of pulp each year. In addition, paper enterprises also face a serious shortage of high-quality human resources. To ensure raw material sources for sustainable development, the State needs to encourage investment in pulp production from domestic raw materials with modern technology, protecting the environment…
In particular, the paper industry is a renewable industry, naturally suitable for the circular economy. Therefore, businesses recommend that management agencies need to have appropriate policies to help the industry develop sustainably; develop a professional and effective collection system, and increase the collection rate. Regarding VAT refunds, businesses propose allowing VAT payment on behalf of scrap purchasing agencies, then proceeding with tax refunds to resolve problems in proving origin and source, facilitating the purchase and recycling of scrap. In the immediate future, the General Department of Taxation should allow a trial of making lists with a maximum value of no more than VND 5 billion to remove difficulties for paper industry enterprises in VAT refunds.
In the long term, it is necessary to consider the scrap collection and recycling sector (including the paper industry) as a non-taxable sector, in line with the Government’s circular economy orientation and CO2 emissions of 0 (Net Zero), Vice Chairman and General Secretary of VPPA Dang Van Sonproposal.