Voters in An Giang and Tien Giang provinces believe that, in the current situation, applying value added tax (VAT) at the rate of 8% on some agricultural materials, gasoline, electricity, and domestic water is higher than the average income of the people.

Therefore, voters suggested that the Ministry of Finance continue to adjust and reduce VAT for these items separately. At the same time, voters suggested that the National Assembly consider reducing the VAT rate for agricultural products by less than 10% when passing the draft Law on VAT (amended) and consider removing VAT on electricity and domestic water.

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Proposal to reduce value added tax on agricultural materials. Illustration photo: Le Duong

Responding to voters' opinions, a representative of the Ministry of Finance said that VAT rates for goods and services subject to VAT are specifically regulated in the Law on VAT (under the authority of the National Assembly). VAT is collected on goods and services, regardless of the purpose or users of goods and services.

The Law on VAT does not provide for VAT exemption or reduction and only stipulates three tax rates: 0%, 5% and 10%. The 0% tax rate applies to exported goods and services (according to international practice). The 5% tax rate applies to goods and services essential to life and goods and services used as inputs for agricultural production. The 10% tax rate applies to other common goods and services.

Regarding electricity and domestic water, according to the current VAT Law, electricity is subject to a VAT rate of 10% and clean water for production and daily life is subject to a VAT rate of 5% (a preferential tax rate compared to the normal tax rate of 10%).

For agricultural materials and products of agricultural origin, the representative of the Ministry of Finance said that the Law on Value Added Tax has provided high incentives.

Furthermore, goods mainly used as inputs or related to services provided for agricultural production activities are also not subject to tax (plant and animal varieties, dredging of inland canals; fertilizers; specialized machinery and equipment for agricultural production; offshore fishing vessels; animal feed, poultry and other animal feed) or subject to a preferential tax rate of 5% (ores for fertilizer production; pesticides and growth stimulants for livestock and plants).

Exported goods, including agricultural, forestry and aquatic products permitted for export, are subject to a 0% VAT rate. Export production and business establishments are entitled to a refund of input VAT if they meet the conditions prescribed by the Law on VAT.

According to the Ministry of Finance, enterprises and cooperatives that purchase unprocessed agricultural, livestock, aquaculture, and fishing products, or those that have only undergone normal processing, and sell them to other enterprises and cooperatives, do not have to declare or pay VAT, but are entitled to deduct input VAT. In the case of selling to households, business individuals, and other organizations and individuals, they must declare and pay VAT at a rate of 5% or at a rate of 1% on revenue.

(Source: Ministry of Finance)