Should fertilizer export tax be imposed?

Fertilizer prices are too high, causing farmers to suffer a lot because production costs are pushed up, eroding the minimum profit.

Fertilizer prices have reached the tolerance level of farmers CONG HAN

In order to cool down fertilizer prices , at the end of April, the Ministry of Finance proposed the Government to uniformly regulate the export tax rate of 5% for fertilizers. However, this proposal is receiving mixed reviews. Recently, the Ministry of Finance said that it will study and submit to the Government a new more suitable plan.

Missing the production rhythm of farmers

May – June is the peak season for fertilizer consumption because this is the beginning of the rainy season, in the growing season of many trees, the demand for fertilizer for orchards as well as perennials increases. In the Southern market, the current fertilizer price remains high: urea fertilizer is about 16,000 – 16,500 VND/kg, potash fertilizer is 18,000 VND/kg, DAP fertilizer is from 22,000 to 26,500 VND/kg.

This is the price that from farmers to businesses (DN) and both authorities have confirmed is too high, agricultural production is not profitable. A large enterprise in the industry also admitted that this price has “reached the tolerance threshold of farmers and cannot be increased any more”.

Dr. Ngo Tri Long, a price expert, said that fertilizer is an input source for the agricultural industry, directly related to tens of millions of farmer households. But during the past time, it feels like the management agency “floats” and forgets the effective tool of tax to control prices. “We failed to protect farmers in time during the recent fertilizer price storm. This has important economic implications as well as social security,” Mr. Long said.

From the end of April and the beginning of May, the two ministries with the main responsibility for this, the Ministry of Finance and the Ministry of Agriculture and Rural Development, have submitted a written proposal to the Government to impose a 5% tax rate on exported fertilizers. “This should have been proposed and approved earlier to stabilize the domestic market and help farmers feel secure in production. Now farmers still have to wait and I am worried that when it is approved, it will “miss the rhythm” of farmers’ production”, Mr. Long commented.

Sharing the same view, Mr. Vu Duy Hai, Chairman of the Board of Directors and General Director of Vinacam Group, analyzed: Tax policy is one of the tools to manage and regulate the economy. In order to lower the domestic fertilizer price, contributing to reducing input costs for agricultural production in the context that many areas of rice and fruit trees are decreasing sharply due to farmers leaving fields and gardens because of atrophy, the ministries The industry should consider imposing export taxes on some fertilizers – a product group that accounts for 30-40% of the current production cost of rice.

In fact, for agricultural production, fertilizer demand is often seasonally short-term. When the season is near, the demand for fertilizer is high; At the end of the crop, the demand for fertilizer decreases. In contrast, fertilizer factories always produce a stable quantity 12 months/year. Therefore, the imposition of tax must satisfy two objectives: Stabilize farmers, ie when there is domestic demand, tax is a tool to block exports to increase supply; and vice versa does not cause difficulties or stagnation for factories when domestic demand decreases. To harmonize, it is necessary to apply a flexible tax policy under an automatic tax schedule.

Mr. Vu Duy Hai for example: When the domestic selling price increases by 20 – 30% more than the approved variable price, the export tax rate (eg 5%) will be applied, but if the market price increases by 50%, 70%, 100%… then the export tax rate will increase gradually to 10%, 30%, 50%…, even to 100% to ensure supply and cool down fertilizer prices in the domestic market. On the contrary, when the domestic price is close to variable costs, the risk of producer losses, the import tax is immediately activated in the opposite direction and the export tax is automatically eliminated.

Businesses worry about excess crisis

Mr. Phung Quang Hiep, General Director of Vietnam Chemical Group, said: Basically, he strongly supports the policy of taxing fertilizers to support farmers and bring in revenue for the state budget. However, how to tax is to be discussed, because currently the domestic supply of NPK fertilizer is in great excess, otherwise it will cause damage to enterprises.

Currently, the country has over 800 large and small enterprises producing and trading NPK fertilizers, with a preliminary capacity of about 10-11 million tons/year, while the domestic demand is about 4 million tons/year. Because NPK products are in surplus, the level of competition among domestic NPK manufacturers is very high, besides competitive pressure from imported NPK products is also a matter of concern. Commenting on the impact of NPK fertilizer export tax from 0% to 5%, Mr. Ngo Van Dong, General Director of Binh Dien Fertilizer Joint Stock Company, said that if the NPK fertilizer export tax was increased, the company would face great difficulty. If the fertilizer export tax is applied to NPK products, the company’s export NPK will increase the price from 30 – 60 USD/ton depending on the product, which will be difficult for consumers.Accepted by the Cambodian and Lao markets, export activities are expected to continue to decline sharply. Exporting is helping the company maintain operations at a capacity of over 50%, reducing fixed costs (depreciation, management, etc.), limiting high inventories, gaining foreign currency, so optimizing resources Bank loans from USD interest rate is lower than the cost of borrowing in VND…, reducing product cost.

Mr. Vu Van Bang, General Director of DAP-VINACHEM Joint Stock Company, said that this draft tax rate of 5% is the desire of state management agencies in an effort to stabilize domestic fertilizer prices. However, when analyzed carefully, this is not only difficult to achieve the set goals, on the contrary, it also causes more difficulties for enterprises. The domestic demand for DAP 61% fertilizer is limited and the competitive pressure of imports is high, so the annual consumption of the company’s products in the domestic market is only 49% of the highest capacity. design. In order to increase production output, thereby reducing product costs, improving competition and providing fertilizer to farmers at the most reasonable price, the company is required to export the excess production. in excess of domestic demand.