Promoting EITI implementation in Vietnam Extractive industries, especially mining, are considered as the most risky sectors. According to an assessment conducted by VietnamGovernment and development partners in 2011, revenue collection is one of four risky areas in mining governance; together with licensing, governance of state owned enterprises and revenue allocation. Due to political, financial and technical complexity, extractive industries are potential area for tax evasion, tax avoidance and other financial illicits. According to an international assessment, financial illicit flows may reach 5 # 25% of GDP annually in resource based countries.

As one of resource endowed countries, Vietnam is contributing around 2.3% of tin, 1.8% of cement and 1% of bauxite in world production. Other minerals have been also exploited with large production scale. In the mining sector, important revenues are collected basing on sale prices and production volumes declared by companies. In many cases, companies may report lower quantity and quality for tax evasion. In addition, mining companiesmay establish fake enterprises to issue the invoices with lower prices for tax avoidance. On the other hand, tax incentives are also creating more loopholes for tax evasion. As an example, Bong Mieu and Phuoc Son gold mines are owned by Besra Corporation. Bong Mieu is receiving incentives with royalty at 3% and CIT at 18%. Whereas, Phuoc Son has to pay royalty at the rate of 15% and CIT at the rate of 40%. Therefore, a big volume of gold ores in Phuoc Son were reported as exploited in Bong Bieu to receive lower tax rates as well as other incentives.

In the world, several initiatives have been proposed for addressing financial illicit and other governance issues in extractive sector. These initiatives have common principles on transparency and participation. Among initiatives, Extractive Industries Transparency Initiative (EITI) is focusing on revenues management. With requirements on data transparency and reconciliation in the extractive value chain, EITI will facilitate coordination between related stakeholders, develop a comprehensive database as well as create oversight mechanism.  In Nigeria, through EITI report 2005, the Government identified 560 million USD arrears need to be collected from oil and gas sector. Nigieria save around 1 Billiton USD annually by addressing the loophole. Therefore, EITI is considered as an effective tool for reducing tax evasion/avoidance, changing behaviour of tax payers and increase revenue collection efficiency in extractive sector.

Vietnam has approached EITI since 2008. After 10 years of consideration, the Governmenthas clearer response for EITI implementation. Specifically, EITI has been included as a solution for social and economic reform in the Government Resolution No 63/2016/N#-CP. On the other hand, after the press conference in July 2016, the Prime Minister issued official leter which request Ministry of Industry and Trade to urgently report on EITI implementation for improving revenue collectionefficiency and promoting better management in the sector.

Under the Financing for Development Program in the period 2017 # 2018, this project is proposed with overall objective of reducing tax avoidance/evasion and increasing revenue collection in the mining sector in Vietnam. Specific objectives including:

# Reforming fiscal policies for reducing tax evasion/avoidance and increasing revenue management efficiency in mining sector.
# Promoting EITI implementation for improving transparency and reducing tax evasion/avoidance in mining sector.
# Raising awareness and building capacity on fiscal issues and EITI for related stakeholders

From 2013, Vietnam Mining Coalition conducted numerous studies on fiscal policies, revenue collection and EITI implementation in mining sector. These studies pointed out the benefits as well as readiness for EITI implementation in Vietnam. Vietnam Mining Coalition also implemented various activities to raise awareness and build capacity on EITI. These activities set up good foundation for Vietnam Mining Coalition to implement this project.

Expected outcomes of the project are:

# Mining fiscal policies will be improved toward more transparency and efficiency in extractive revenue management.
# EITI mechanism will be adopted by 1- 2 provinces.
# EITI implementation will be committed by the Government by 2018.