Appying VAT on fertiliser for sustainable development

At a talk show on fixing taxes to strengthen business performance on June 13, experts stated the benefits of applying 5 per cent VAT on fertiliser.

Nguyen Van Phung, former director general of the Large Enterprise Tax Administration Department under the General Department of Taxation, said that the first benefit is to raise state budget revenue coming from import tax, while selling prices of fertiliser may not change or even reduce.

"We can see this benefit clearly. Farmers can expect on lower-price fertiliser, that fertiliser businesses are deducted a part of input taxes," Phung said.

Moreover, he added, some businesses producing products subject to 5 per cent VAT but suffering 10 per cent VAT of material input. Previously, output VAT of fertilisers, pesticides, pharmaceuticals, equipment was less than input tax. If applying VAT, these businesses will not lose capital.

"Currently, nearly VND100 trillion ($4 billion) is in non-deductible input VAT, in businesses that are debiting accounting accounts, while input VAT is not deductible, causing a loss. With new provision for the Law on VAT, businesses will benefit," Phung affirmed. "During my life working in tax sector, if this provision comes true, it will be the best ever."

In the view of Nguyen Hoang Trung, vice general director of DAP-Vinachem JSC, if the 5 per cent VAT policy comes true, businesses will have better motivation to invest, repair, and upgrade factory equipment, expand scale, and update technology.

"For the fertiliser industry, related to the chemical industry, the technological life of a chemical factory is about 10–15 years. If we have no motivation, no resources, it is very hard for domestic fertiliser production to innovate technology, and make high-competitive products, maintain stable market prices, and manage the market," Trung said.

He said the most important motivation is boosting the domestic manufacturing industry for better services for farmers, and sustainable development of the economy. This is also the basis for green and circular economy as the government's perspective.

Nguyen Tri Ngoc, vice chairman of Fertiliser Association of Vietnam, confirmed the prospective future of the fertiliser industry. "Businesses have been suffering VND10 trillion ($4 billion) in loss over the last ten years, that should be spent on machines and technologies to improve fertiliser quality," he urged.

At present, there are about 3.5-4 million tonnes of NPK fertiliser among 11-12 million tonnes of total fertiliser. Businesses expect to innovate mixed fertiliser technology (NPK fertiliser) to high-tower technology, but have not much money to spend for technologies.

"So now, if 5 per cent VAT on fertiliser is approved, an opportunity is opened for them to invest and update machines, and technologies to create better quality, and more effective products," Ngoc said.

"With high-quality fertiliser, farmers fertilised less than previous, saving a lot of time, effort, and money. In a competitive and integrated context, local agricultural products have to innovate to maintain their competitive advantage. Input costs reducing and quality improved will contribute to developing a green, clean, safe and sustainable agricultural economy. This is an opportunity for the fertiliser industry, for farmers and our entire agricultural economy."

VAT overhaul to boost agriculture prospects Vietnam is set to revise its existing Law on Value-Added Tax with a reclassification of products in areas like agriculture and fisheries, with the hopes of making them more favourable in performance.

Current VAT rate may remain for foreseeable future The government is to ask the National Assembly to continue with its current VAT rate of 8 per cent until the year’s end as part of the country’s efforts to assist enterprises currently facing operating obstacles.

Still no VAT hike proposal to aid business development The amended VAT Law is set to be submitted for approval next month with new content, yet the common tax rate is still proposed at 10 per cent to help businesses through current turbulent times.

VAT cut continuation expected to ease woes The business community is set to benefit from a continued VAT reduction as part of the country’s major efforts to assist enterprises currently facing massive difficulties.

VIR to host talk show on tax amendments to promote business activities A talk show themed “Tax Amendments to Promote Business Activities” will be held by VIR on June 14 to provide insights into amended tax regulations.