Hanoi (VNS/VNA) - The proposal to impose a 5 percent tax on inorganicfertiliser exports may increase costs and reduce the competitiveness ofVietnamese fertilisers.

TheVietnam Fertiliser Association has just sent a written response to the Ministryof Finance regarding the draft proposal of imposing a 5 percent export taxon inorganic fertilisers.

Currently,urea and phosphate fertilisers have already been subject to the 5 percent export tax. Therefore, applyingthe tax does not affect the export of these products.

However,NPK fertiliser is currently subject to 0 percent export tax. Therefore, a5 percent export tax will significantly impact the NPK fertiliser industry.

Similarto NPK, the DAP fertiliser is also imposed a 0 percent export tax, which willbe affected if the new regulation is applied.

Thefertiliser association said that the application of the tax should only beapplied temporarily in certain times when there was a short supply, andthe world price rose too high.

Inorganicfertilisers include many types, each with its own characteristics in termsof raw materials and markets. Therefore, it is necessary to evaluateand impose export taxes separately for each type, said the association.

"Theimposition of the 5 percent export tax on NPK fertilisers will greatly affectproducers because currently there is excess capacity in the country, reducingcompetitiveness because the price will increase from 30 USD to 60 USD pertonne," said Phung Ha, Vice President and General Secretary of the VietnamFertiliser Association.

TheMinistry of Finance said that the unification of an export tax of 5 percentwould increase budget revenue from fertilisers.

However,the Vietnam Fertiliser Association believed that the above goal was unlikely tobe achieved because the export tax on urea fertiliser remains unchanged at5 percent, while its export volume is relatively large.

Meanwhile,NPK export revenue may decrease because NPK export volume was at significantrisk of plummeting when the competitiveness weakened.

Therefore,the association recommended the Ministry of Finance consider, evaluate andpropose a separate export tax rate for each type of fertiliser flexibly toensure that it does not negatively affect the competitiveness of domesticproducers.

Inthe long term, the fertiliser association proposes the Ministry of Financesubmit to the National Assembly an amendment to the Law on Value Added Tax sothat value-added tax could be refunded to domestic fertilisers and an equal playing groundwould be created among domestic manufactured fertilisers and imported ones.

TheGeneral Department of Customs reported that the country's fertiliser exportsreached about 1.28 million tonnes last year, with a turnover of 559 million USD,while the country's import of fertilisers of all kinds was 4.54million tonnes, with a turnover of more than 1.4 billion USD.

VuVan Bang, General Director of DAP Vinachem, hopes that the Governmentwill maintain and not increase the export tax on fertilisers in groups31.02, 31.03, 31.04, 31.05 in the Export Tariff.

Theconsumption of this company's products in the domestic market was currently thehighest at only 49 percent of its designed capacity, which forces thecompany to export, said Bang.

Ifthe tax is increased to limit fertiliser exports, the production cost of DAPfertiliser would certainly rise due to inventory, he added./.