Fertiliser tax does more good than harm: Experts

Workers load up fertilisers at the Lam Thao Supe Chemical Company’s factory in Phu Tho Province. - VNA/VNS Photo Hoang Hung

DAP and MAP fertiliser products have been officially subject to safeguard measures with a provisional tax rate of VND1,855,790 (US$85.6) per tonne since August 19, under a regulation set by the Ministry of Industry and Trade (MoIT).

The decision was expected to help relieve domestic fertiliser producers from competition pressure brought on by imported products and has also created opportunities to revitalise the country’s fertiliser-producing industry.

However, experts have reached consensus late last week that though the tax was issued in favour of domestic production, future optimal solutions are still required to help balance both producers’ and farmers’ benefits as the safeguard measure is just temporary.

The temporary safeguard measure will last no more than 200 days and the imposition will be ceased by March 6, 2018, or whenever the Ministry of Industry and Trade issues an official decision.

Le Trieu Dung, deputy director of the Trade Defence Department under the MoIT, affirmed that safeguard measures have clear objectives, to create an equally competitive market, in which domestic fertiliser enterprises will be competing on a long-term basis with imported products.

He argued that though the tax would initially drive prices up in the market, seemingly hurting farmers’ income, it would create a healthy basis for fair competition when the market readjusts stable input prices.

In order to harmonise benefits for both parties, MoIT has co-operated with the Viet Nam Fertiliser Association, VFA, to amend and supplement some related regulations of fertiliser products not subject to value added tax (VAT) to create more favourable conditions for fertiliser enterprises, Trieu Dung added.

Nguyen Van Thanh, director of the MoIT’s Department of Chemicals, said that the ministry’s decision to impose self-defence tax on fertilisers was very timely and beneficial to enterprises producing DAP and MAP fertiliser products.

Regarding the fertiliser market, he consented that there was a time when fertiliser imports were cheap, but they have become exponentially more expensive. So, in the long run, the imposition of self-defence tax will help stabilise the market, and eventually farmers will also benefit from it.

More importantly, domestic enterprises will regain their status as an active source of supply, no longer dependent on imports or passive in production.

This is considered as the number one advantage, as dependence on imports can prove to be very dangerous, especially when the country needs a counterbalance to curb the increasing quantity of fertiliser imports, said Thanh.

In addition, the experts also said that the application of trade remedies will double as anti-dumping of foreign fertiliser products into Viet Nam, helping to partly protect the interests of consumers in the country.

Nguyen Tien Dung, chairman of the Agricultural Products and Materials Joint Stock Company (Apromaco), emphasised that two future solutions should be implemented in parallel, once the provisional tax has ended.

He suggested that MoIT should reduce VAT to 5 per cent on imported fertilisers, while encouraging domestic producers to improve product quality and cut down on cost, so both firms and farmers can equally benefit.

In case such a solution is approved, it is estimated that fertiliser producers can save up to VND2.5 trillion ($111 million) in expenses each year, which would help enhace considerably their competitiveness in terms of price.

Tien Dung also said that under these safeguard tariffs, domestic producers will benefit, while importers will face difficulties due to higher input costs. Therefore, imposing such a tax does not have a big impact on farmers or producers who receive support from the Government on anti-dumping mechanisms needed to maintain a reasonable price level.