Applying 5% VAT on fertilizers, 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 imposing a 5% VAT on fertilizer products.

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: NA

“If we increase the tax rate by 5%, it will affect farmers and certainly when they meet with voters, people will continue to reflect on why the State must increase taxes. If the tax rate increases by 5%, of course fertilizers must increase as well,” said Mr. Hoa. The Dong Thap delegation proposed not to increase taxes 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 production enterprises would not be able to deduct about 1,500 billion VND. If there were a 5% tax, about 5,700 billion would be collected and to offset about 1,500 billion for enterprises, the budget would still collect about 4,200 billion VND in profit.

“So the question is, where did 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,” said delegate Cuong.

The delegate 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 possession 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 the 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.

Sharing the same concern, 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 transferring fertilizer products from non-taxable to taxable with a tax rate of 5%.

Delegate Tran Quoc Tuan. Photo: NA

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 carefully consider and weigh before voting to approve.

“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 production 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 VND 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. Phuc 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 once again on this issue and will accept them at the end of the term," said Minister Ho Duc Phoc.

Vietnamnet.vn

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