On October 17, 2024, Vietnam Federation of Agriculture and Rural Development Associations, in collaboration with USAID and the Enterprise Development Agency, organized a seminar to discuss the impact of applying a 5% Value-Added Tax (VAT) on the fertilizer industry. The transition from tax exemption to a 5% tax rate is anticipated to bring benefits to the government, businesses, and farmers alike. Benefits for the Government and Businesses It is projected that budget revenue from the application of VAT will rise by an additional 1,541 billion VND, with total output VAT revenue reaching 6,225 billion VND and input VAT deductions amounting to 4,713 billion VND. Input Tax Deduction: Domestic fertilizer manufacturers will be eligible for input tax deductions, helping to lower production costs, which can subsequently reduce product prices. Demand and Production: Vietnam currently requires approximately 10.5 to 11 million tons of fertilizer annually, with major types including Urea, DAP, Potassium, and NPK accounting for a significant proportion. Export and Import: In 2022, Vietnam exported 1.72 million tons of fertilizer worth $1.1 billion and imported 3.39 million tons valued at $1.62 billion. In 2023, exports decreased to 1.55 million tons, while imports rose to 4.12 million tons. Conflicting Opinions on the Tax Policy Supporting opinion: Some believe that imposing VAT is essential for increasing tax revenue and encouraging businesses to invest in new fertilizer production technologies, thereby enhancing agricultural productivity. Opposing opinion: On the contrary, some are concerned that imposing the tax would primarily benefit businesses, while farmers would bear the burden of higher fertilizer prices. Impact on Farmers Fertilizer Prices: The implementation of a 5% VAT may lead to a decrease in the prices of certain domestically produced fertilizers, such as Urea and DAP, while the prices of imported fertilizers could rise, creating a competitive advantage for local fertilizers. Recommendations The workshop called on the Government and the National Assembly to amend Law No. 71/2014/QH13, shifting fertilizers from VAT exemption to a 5% VAT rate. It proposed revising Decree No. 26/2023/ND-CP on fertilizer export taxes based on the principle of imposing a 5% tax rate on fertilizers insufficiently produced domestically and a 0% tax rate on fertilizers sufficiently produced locally. The workshop emphasized the importance of thoroughly analyzing the tax policy's impact on all three stakeholders: the state, businesses, and farmers, to ensure a balance of interests and sustainable development for the agricultural sector.
