VCCI recommends reconsidering the imposition of 5% tax on semi-processed agricultural products

VCCI recommends reviewing the 5% tax on semi-processed agricultural products.

According to VCCI, key industry associations said the new value-added tax policy is creating unprecedented barriers, seriously affecting cash flow and competitiveness of Vietnamese goods in the international market.

The biggest problem is the regulation imposing a 5% tax rate on agricultural, forestry and aquatic products that are “not processed into other products or have only undergone normal preliminary processing”. According to experts’ analysis, this regulation does not reflect the true nature of value added tax, which is a tax that is only levied on the added value of the product.

Every year, the coffee industry is estimated to have to temporarily pay nearly 10,000 billion VND in taxes, while the pepper industry has to "shoulder" about 2,240 billion VND. In the context of the profit margins of these industries being very thin, only 1-3%, the "collect first - refund later" mechanism is eroding the financial health of businesses.

This increases export prices, causing Vietnamese agricultural products to lose their competitive advantage compared to major competitors such as Brazil, Indonesia, and India - where similar products enjoy 0% tax rates or are not subject to tax.

Besides, another bottleneck pointed out by VCCI is the lack of consistency in tax imposition on raw materials for animal feed production.

Although the law stipulates that finished animal feed is not subject to tax, many local tax authorities impose a 5% tax on input materials such as corn, bran, and fish meal at the commercial stage. This not only causes difficulties for domestic feed producers but also creates unfair competition with imported goods, which are not subject to value-added tax.

In addition, many businesses said that the current tax refund process is too complicated and lengthy, and even applications are rejected for reasons beyond their control.

One of the most controversial regulations is the requirement that businesses can only get tax refunds when the seller (supplier) has “declared and paid taxes”. This regulation is considered unreasonable, shifting the risk from the supplier and the management responsibility of the tax authority to the purchasing business.

In addition, the restriction of tax refunds not exceeding 10% of export revenue in a period is also not suitable for the seasonal production characteristics of the agricultural sector. Enterprises often have to focus on purchasing large quantities of raw materials at the beginning of the season, but exports are scattered throughout the year, causing most of the input tax to not be fully refunded.

In addition, purchasing raw materials from millions of small-scale farmers, who do not have the function of issuing value-added invoices, also puts businesses in a difficult position when proving the origin of inputs.

Similarly, businesses exporting through e-commerce platforms (such as Amazon and Alibaba) are also "stuck" due to the lack of required traditional documents, even though the transactions are completely legal.

Faced with the above shortcomings, VCCI has compiled and sent to the Prime Minister 6 specific groups of recommendations. The focus is on the proposal to reconsider the imposition of 5% tax on semi-processed agricultural products, and to return to the mechanism of "no declaration and tax payment" for semi-processed agricultural products as before, to free up capital flow for businesses.

In addition, VCCI proposed that the Government direct strong reform of tax refund procedures towards automation and build an interconnected data system for quick verification.

In particular, it is necessary to abolish the regulation that forces enterprises to be responsible for the tax obligations of suppliers. VCCI also recommends allowing the use of purchase statements without invoices and electronic documents in e-commerce transactions as a valid basis for tax deduction and refund.

Source: https://hanoimoi.vn/vcci-kien-nghi-xem-xet-lai-viec-ap-thue-5-voi-hang-nong-san-so-che-720679.html