Speaking at the discussion session, delegate Tran Van Lam, Deputy Head of the National Assembly Delegation of Bac Giang province, said that the issue that delegates are most concerned about in this amendment of the Law on Value Added Tax is the transfer of fertilizers, supplies, machinery, and specialized equipment for agricultural production from non-taxable subjects to subjects subject to a 5% tax rate.
“Imposing VAT will greatly affect the rural agricultural sector, increasing input material prices, increasing costs, prices, reducing the competitiveness of agricultural products; reducing farmers' income, affecting rural areas,” said delegate Tran Van Lam.
The delegate further analyzed that in reality, the above items are not subject to VAT, so manufacturing enterprises are not refunded input VAT on production materials. Thus, domestically produced products may be less competitive than imported ones. Due to the characteristics of our country's agricultural sector, which is mainly household and small-scale production, not eligible for accounting to deduct input VAT, this 5% VAT will increase the cost of agricultural products, reduce competitiveness, and reduce the income of agriculture and farmers. Therefore, if taxes are increased, enterprises will increase their competitiveness, increase profits, and increase budget revenue, but farmers will suffer.
“From another perspective, as reported by the Ministry of Finance, these items are subject to 5% VAT, the State budget will increase revenue by over 6,300 billion VND. So, where does this money come from? Is it from businesses? In reality, agriculture and farmers have to bear the burden...”, delegate Tran Van Lam commented.
From the perspective of business interests, the State's policies need to support domestic businesses and products to compete equally at home with foreign manufacturers and imported goods. However, there are many ways to support, without necessarily sacrificing the interests of tens of millions of farming households, the agricultural sector, and rural areas to support businesses. Even in the VAT policy, if the above items are included in the 0% tax rate, businesses will be refunded their input without causing damage to farmers.
“It is not advisable to transfer fertilizers, supplies, specialized machinery and equipment for agriculture and offshore fishing vessels to the VAT taxable subjects; if transferred, they should only be subject to a 0% tax rate. It is necessary to support domestic enterprises producing these products to compete equally at home with similar imported products, but the responsibility should not be pushed onto agriculture and farmers,” affirmed delegate Tran Van Lam.
Sharing the same view, delegate Hoang Thi Thanh Thuy (National Assembly Delegation of Tay Ninh Province) said that fertilizers should be subject to a 0% VAT rate. Clause 2, Article 9 of the draft Law adds a provision to apply a 5% tax rate to fertilizers, machinery and specialized equipment for agricultural production, while the current Law stipulates that these items are not subject to tax. Therefore, it is necessary to stipulate that fertilizers are subject to a 0% tax rate, in order to further reduce product costs and deduct input VAT. Such a provision is beneficial to agricultural production enterprises and fertilizer production enterprises.
Similarly, Clause 1, Article 5 of the draft Law stipulates: "Products of crops, planted forests, livestock, aquaculture, and fishing that have not been processed into other products or have only undergone normal preliminary processing by organizations and individuals that produce, catch, sell, and are at the import stage" are not subject to tax. Delegate Hoang Thanh Thuy also proposed to change this group of subjects to subjects subject to 0% VAT rate.
Delegate Tran Quoc Tuan (National Assembly Delegation of Tra Vinh Province) said that it is necessary to carefully assess the impact of changing fertilizer products from non-taxable to subject to a tax rate of 5%. There needs to be a more thorough survey, assessment and full report on the impact of changing fertilizer products from non-taxable to taxable with a tax rate of 5% from both perspectives: Impact on the development of the fertilizer production and trading industry, serving agricultural production; impact from increased prices of fertilizer products, affecting farmers' income.
According to the delegate, in order to encourage the development of organic agriculture, green and clean agriculture, the Law needs to classify "fertilizers" into two groups of goods. These are "chemical fertilizers" and "organic fertilizers", in which, special priority is given to exempting value added tax on organic fertilizers like many countries today. In order to orient and gradually change the habit of using chemical fertilizers to using organic fertilizers; at the same time, gradually shift Vietnam's agricultural production to green and clean agriculture according to the policy of the Party and the State.
Delegate Khang Thi Mao (National Assembly Delegation of Yen Bai Province) suggested that the Government consider not applying the above proposal, because the nature of value added tax is not a factor of production costs, but simply an amount added to the selling price of service providers; value added tax is not affected by the organization and division of production and business processes. Through studying international experience, when wanting to give incentives to a certain field, there are 2 options: Putting it on the list of non-taxable areas or applying 0% tax. Therefore, it is necessary to consider applying a 5% tax rate to fertilizers.
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