5% VAT on fertilizer, each farmer pays an additional 38,000 VND/month

On the afternoon of June 24, the National Assembly discussed in the hall the draft Law on Value Added Tax (VAT) (amended). One of the contents that many delegates were interested in discussing was the regulation on levying a 5% VAT on fertilizers.

Saying that taxes reduce prices is not convincing.

Delegate Pham Van Hoa (Dong Thap delegation) proposed considering adding the 5% tax rate to fertilizers, pesticides, rubber latex, fishing vessels in offshore and sea areas, and specialized machinery serving agricultural production.

Because this regulation will increase fees, input costs and product prices, a burden for farmers.

Delegate Pham Van Hoa. Photo: QH

“If we increase the tax rate by 5%, it will affect farmers and certainly when meeting voters, people will continue to reflect why the State has to increase taxes. If the tax rate increases by 5%, of course fertilizers will have to increase as well,” said Mr. Hoa. The Dong Thap delegation proposed not to increase the tax and if there is an increase, it must be lower than 5%.

Delegate Hoang Van Cuong (Hanoi delegation) also expressed concern about the explanation of the drafting agency. He analyzed: “The argument that tax is imposed to reduce prices is not convincing. Because, the assessment report of the Ministry of Finance pointed out that since January 2015, after applying 0% tax, fertilizer prices immediately and continuously decreased.”

Delegate Cuong added that it was not until 2018 that fertilizer prices began to increase because the Phu My fertilizer plant was not operating at full capacity. By 2022, fertilizer prices had increased significantly due to the Russia-Ukraine conflict.

"Therefore, we cannot say that we increase taxes but have the ability to reduce prices, we cannot say that increasing taxes like that will benefit farmers," delegate Hoang Van Cuong argued.

He cited a report from the Ministry of Finance stating that without tax, fertilizer manufacturing enterprises would not be able to deduct about VND1,500 billion. If there were a 5% tax, about VND5,700 billion would be collected and to offset the businesses' loss of about VND1,500 billion, the budget would still have a profit of about VND4,200 billion.

“So where do the 4,200 billion budget revenue and 1,500 billion compensation for fertilizer production enterprises come from? Obviously this money comes from farmers, so people have to pay more. This is unreasonable,” delegate Cuong analyzed.

Delegates suggested that farmers and fertilizer production enterprises cannot be forced to pay input tax, but should apply a 0% fertilizer tax and fertilizer production enterprises should be refunded input value added tax.

Need to carefully assess the impact

In addition, delegate Hoang Van Cuong suggested not to consider increasing revenue by adjusting value added tax.

If we want to increase budget revenue, Mr. Cuong suggested considering two very necessary taxes.

Firstly, property tax has the ability to mobilize a large amount of revenue for the budget, and at the same time has a very important regulatory role in the ownership of assets.

“Especially, we have just passed the Land Law, land prices are determined according to market principles. If we do not have this tax soon, it may push up property speculation,” the delegate warned.

Second is environmental protection tax. This is also a tax that needs to be issued soon to regulate acts of pollution and environmental damage, while at the same time encouraging the green transition trend.

Also concerned, delegate Tran Quoc Tuan (Tra Vinh delegation) proposed 3 contents to the National Assembly and the Government.

That is, 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%.

Delegate Tran Quoc Tuan. Photo: QH

According to the delegate, it is necessary to assess from the perspective of the impact on the development of the fertilizer production and trading industry serving agricultural development and the impact of increased fertilizer prices on farmers' income. At the same time, consider the aspect of competitive efficiency of agricultural products, so that the National Assembly can consider and weigh carefully before voting to pass.

“We cannot look at it from the perspective of supporting domestic fertilizer producers and ignore the impact on the interests of farmers using fertilizers. We also cannot be sure that when applying a 5% tax rate on fertilizers, domestic producers will have the opportunity to reduce selling prices as reported by the Fertilizer Association,” delegate Tran Quoc Tuan noted.

In addition, he also proposed not to increase the value-added tax rate on fertilizer products but to add domestic manufacturing enterprises as subjects eligible for input value-added tax deduction.

Creating resources for sustainable business development

Explaining this content, Finance Minister Ho Duc Phoc said that currently, the output of domestically produced fertilizer is 73.3%, while imported fertilizer is 26.7%, or about 4 million tons/year.

“Our current regulations for businesses are not equal to import businesses,” the Minister explained.

Minister of Finance Ho Duc Phoc. Photo: QH

Mr. Phuc said that tax refunds will create a resource for businesses to innovate technology, reduce product costs and develop sustainably.

"If we calculate the tax refund for businesses at 1,500 billion VND, then there is 4,200 billion left to assess the impact on 9.1 million people. We also calculate that each farming household will pay an additional 461,000 VND per year, and 38,000 VND per month," said the Minister of Finance.

In addition, Mr. Phoc said that the price of agricultural products is not necessarily due to tax deductions but can be affected by supply and demand. If supply increases, prices will decrease, if supply is low, prices will increase.

"We will ask for opinions from associations and National Assembly delegates on this issue again and will accept them at the end of the term," said Minister Ho Duc Phoc.

Vietnamnet.vn

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