ECF asks Vietnam to look into coffee tax dodge before next crop

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The European Coffee Federation, representing companies including Volcafe Ltd. and Louis Dreyfus Commodities Suisse SA, asked authorities in Vietnam to look into a coffee tax dodge before next season.

The Rijswijk, Netherlands-based group wrote on July 26 to authorities including the office of Vietnam's prime minister, the ministry of finance and the Department of Agriculture and Rural Development, Roel Vaessen, the ECF's secretary general, said on a media call today. Dodging of value-added tax is reducing supplies of sustainable and certified beans, he said.

"This is an awareness exercise, we now have to wait for the feedback from Vietnam," said Vaessen. "One of the reasons to really try to make an effort to get this out was indeed to get this awareness in place before next season."

The number of violators who buy and sell receipts to obtain value-added tax in coffee trading is "on increasing trend," the finance ministry said on its website on July 15. Some companies are dodging tax, causing unfair competition for legitimate traders in buying coffee in Dak Lak, the local tax department said on its website on June 19. Dak Lak is the biggest-growing province in the world's leading producer of the robusta coffee variety used in espresso.

"The effects of the application of the VAT system mean that coffee is finding its way to the market in a rather more informal, undocumented, uncontrolled manner and the identity of the coffee in terms of sustainability is lost," Vaessen said. "Quite a few roasters and their suppliers and traders have made considerable commitments to purchase sustainably produced coffee and that's a serious issue."

Gevalia, Kenco

Mondelez International Inc. (MDLZ) says all beans used in its European coffee brands will meet standards set by certifying bodies such as Rainforest Alliance and 4C by 2015, according to the company's website. The company is the maker of brands such as Gevalia, Kenco and Grand-Mere.

Vietnam said this month it will intensify measures to prevent tax dodging, according to thefinance ministry. Deputy Finance Minister Do Hoang Anh Tuan urged tighter collaboration among provincial authorities to prevent tax dodging practices in coffee trading.

"We've noticed these steps and we encourage them and hope they produce the desired results," Vaessen said.

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