The shift of fertilizers from being tax-exempt to being subject to a 5% tax will affect millions of farmers and the competitiveness of Vietnamese agriculture .
This was a concern raised by many National Assembly deputies during the plenary session discussing the draft Law on Value Added Tax (amended) this afternoon, June 24th. Most opinions disagreed with the proposed 5% tax rate on "fertilizers" as outlined in the draft law.
Are farmers facing additional tax pressure?
Representative Tô Ái Vang, from the Soc Trang Provincial National Assembly Delegation, shared that during the delegation's meetings with constituents, the representatives have consistently received feedback, aspirations, and suggestions from voters regarding the increased investment costs for each farming cycle, including the prices of fertilizers, pesticides, fuel, labor, and transportation. The long-standing conflict between agricultural product prices and fertilizer prices remains a pressing issue in Vietnamese agriculture.
Therefore, the delegate proposed that the National Assembly consider amending the Value Added Tax Law to include fertilizers under a 0% VAT rate. "If the law maintains a 5% VAT rate on fertilizers, farmers would have to spend approximately 6,000 billion VND. However, if the draft law applies a 0% VAT rate to fertilizers, instead of adding 2,000 billion VND to the state budget, this money would be used to support businesses and farmers. This would significantly reduce farmers' input costs," the delegate stated.
According to Representative Tô Ái Vang, the National Assembly and the Government should choose policies that benefit farmers to clearly demonstrate the policies that will be codified into law. Vietnam is one of the five countries most affected by climate change. Following trends and recommendations, the inevitable direction for Vietnamese agriculture today is to increase the production and use of organic fertilizers. Besides the complex fluctuations in the price of inorganic fertilizers, the organic fertilizer market is predicted to grow at a double-digit rate. Therefore, the representative believes that if the draft law includes fertilizers as a subject to a 5% tax rate as planned, it will contribute to increasing pressure on farmers, who are already in a vulnerable agricultural sector.
Agreeing with the proposal of the representative from Soc Trang, Representative Tran Quoc Tuan, from the Tra Vinh Provincial National Assembly Delegation, stated that a thorough survey, assessment, and more comprehensive report are needed on the impact of changing fertilizers from a tax-exempt item to a taxable item with a 5% tax rate. This should be done from two perspectives: the impact on the development of the fertilizer production and business sector serving agricultural production; and the impact of the price increase on farmers' income and the competitiveness of agricultural products.
Also supporting the development of organic, green, and clean agriculture, according to delegate Tran Quoc Tuan, the Law needs to classify "fertilizer products" into two groups of goods: "chemical fertilizers" and "organic fertilizers," with particular priority given to exempting organic fertilizers from value-added tax, as many countries are doing.
"This priority aims to help guide and gradually shift the habit of using chemical fertilizers to using organic fertilizers, and at the same time gradually transform Vietnam's agricultural production towards green and clean agriculture in accordance with the policies of the Party and the State," the representative from Tra Vinh emphasized.
"We should not take from the poor to give to the rich."
According to Representative Tran Anh Tuan from the Ho Chi Minh City National Assembly Delegation, raising the tax rate from 0% to 5% as proposed in the draft law for certain agricultural production inputs will reduce the competitiveness of businesses producing these goods, put inflationary pressure on consumer goods, and affect people's lives.
“Designing two separate policies can easily lead to conflicts when implementing expansionary fiscal policy while introducing new taxable items, which will diminish the effectiveness of the expansionary fiscal policy we are currently implementing. Therefore, it is necessary to design policies according to a roadmap, especially for agricultural products, where a reasonable tax policy needs to be recalculated. A 0% tax rate could be introduced instead of the 5% proposed in the draft law, allowing businesses to deduct taxes. This way, food products will not face price pressure while still implementing expansionary fiscal policy more effectively and efficiently,” said Representative Tran Anh Tuan.
Furthermore, delegates argued that the draft Law lacks a roadmap for its implementation, while we need to continue implementing expansionary fiscal policies until the end of 2025 as there is still considerable room for maneuver. Therefore, it is necessary to design the law in a way that empowers the Government to include certain taxable subjects in accordance with the tax reform roadmap, but with a timeframe appropriate to the actual situation.
Regarding the need to reconsider applying a 5% tax rate to fertilizers, Representative Khang Thi Mao from the Yen Bai Provincial National Assembly Delegation stated: “According to the current Value Added Tax Law, fertilizers are exempt from value added tax. Businesses are not allowed to declare and deduct input value added tax on goods and services, including investment and asset purchases for fertilizer production. Instead, it must be included in the product cost, leading to increased production costs, reduced profits, and a disadvantage in competing with imported fertilizers; difficulties in securing capital also prevent businesses from being proactive in investing and expanding production.”
Representative Khang Thi Mao suggested that the Government consider not implementing the above proposal yet. According to the representative, the nature of value-added tax (VAT) is an indirect tax with neutrality and high economic efficiency, demonstrated in two aspects: VAT is not affected by the business results of taxpayers; therefore, VAT is not a factor in production costs, but simply an additional revenue added to the selling price of service providers; and VAT is not affected by the organization and division of the production and business process.
"Research into international experience shows that when considering preferential treatment for a particular sector, there are two options: exempting it from tax or applying a 0% tax rate. Given the continued growth in the global and domestic fertilizer markets, I suggest that the application of a 5% tax rate on fertilizers be carefully considered," the representative proposed.
Expressing his disagreement with the proposed tax increase that farmers would have to bear, National Assembly delegate Tran Van Lam from Bac Giang province emphasized: "It is not advisable to transfer fertilizers, supplies, machinery, specialized equipment for agriculture, and offshore fishing vessels to the VAT taxable category. If they are transferred, they should only be subject to a 0% tax rate. Supporting domestic businesses to produce these goods and compete fairly with similar imported products is necessary, but this responsibility should not be shifted to agriculture and farmers; we should not take from the poor to pay the rich."
VN (according to VNA)Source: https://baohaiduong.vn/phan-bon-chiu-thue-suat-5-khong-nen-de-nong-dan-them-ap-luc-385435.html
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