VietNamNet Bridge - After applying a safeguard measure to protect local fertilizer production, the Ministry of Industry and Trade (MOIT) has proposed to amend the tax law to help fertilizer plants incurring big losses.

According to MOIT, four fertilizer plants on the list of 12 super-projects which have incurred big losses, namely Ninh Binh, Ha Bac, DAP No 1 (Hai Phong) and DAP No 2 (Lao Cai), have resumed their operation with the average additional charge of 75-90 percent. Thanks to the contract policy, the business performance of the plants has improved.

However, a local newspaper reported that except DAP 1 which made a modest profit of VND4 billion in August, the other plants continue taking losses and have big stocks. Ninh Binh, for example, incurs a loss of VND68 billion and has 33,000 tons of unsold products. Ha Bac has a loss of VND35 billion and 8,500 tons of unsold products. The figures are VND50 billion and 7,500 tons for DAP 2.

Deputy PM Vuong Dinh Hue at a meeting discussing solutions to 12 unprofitable projects, assigned MOF to consider the amendment of the tax law No 71.

Taking effect on January 1, 2015, the tax law stipulates that fertilizer is not subject to VAT, which means that fertilizer manufacturers don’t get tax refunds for input materials. As a result, the production cost is high which affects product competitiveness.

The idea of amending the tax law came from a proposal by MOIT which says the amendment is necessary to protect local production and help lift difficulties for the four plants.

The idea of amending the tax law came from a proposal by MOIT which says the amendment is necessary to protect local production and help lift difficulties for the four plants.

Bui Kien Thanh, a renowned economist, doesn’t think it is a good idea to amend the law.

He said in general, state-owned enterprises can enjoy big preferences when implementing their projects and that there is no need to give them more preferential treatment.

“It would be better not to give special treatment to state-owned enterprises, unless they serve the public interest. Other enterprises must respect the rules of the market economy,” Thanh commented.

Head of the Vietnam Economics Institute Tran Dinh Thien said it is necessary to think carefully before making decisions. In principle, the solutions need to be designed in a way to minimize the loss for the state.

If the policy on tax reduction can help the fertilizer plants, retain jobs for workers and gain other purposes, it would be better to set up a roadmap for the reduction.

In August, MOIT decided to apply temporary safeguard measures for DAP and MAP fertilizer products, following a request by two fertilizer companies belonging to Vinachem. 

The provisional tax rate is VND1.85 million per ton, commencing from August 19 and lasting 200 days. Safeguard measures will be suspended after March 6, 2018.

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