The Ministry of Finance proposes reducing import duty of chicken, pork and by-product

The Ministry of Finance expected to reduce tax rate of fresh and frozen pork. Source: Internet

The Ministry of Finance has sent official dispatch No. 14813/BTC-CST to ministries and sectors to collect feedback on the amendments and supplements a number of contents of Decree No. 125/2017/ND-CP of the Government on amendments and supplementing a number of articles of Decree No. 122/2016/ND-CP dated September 1, 2016 on the preferential import and export tariff, the list of goods and the absolute tax, mixed tax, import duty above duty quotas.

According to this official dispatch, chicken is proposed to reduce import duty rate on frozen chicken parts in the sub-heading 2207.14 from 20 percent to 18 percent (the US suggests 14.5 percent) by the Ministry of Finance. Meanwhile, the tax rate for fresh or frozen pork (except for whole or half carcasses, ham and shoulder) (HS code is 0203.19.00), reduced from 25 percent to 22 percent.

According to the Ministry of Finance, the meat and by-products of chicken are in subheading 0207.14. In the dispatch dated November 8, 2019, the US Embassy proposed reducing chicken from 20 percent to 14.5 percent in 2020 and 0 percent in 2028.

According to statistics, compared to 2018, the import volume of chicken increased in the period from April to June 2019, but has decreased gradually since June. According to the Ministry of Agriculture and Rural Development, the increase in import volume is mainly because of African swine fever, so people consume more chicken.

Among agricultural products, chicken is the one item of commodities that Vietnam has high protection in tariff agreements or in the negotiation process, without commitments to cut or if it is forced to reduce, it will be in the final stage when implement the commitments.

Therefore, the current tariffs also basically keep the ceiling of commitments before the time for final reduction due to the fact that chicken is an essential food, even considering in the aspect of consumption habits of Vietnamese people. At the same time, it is the products of farmers, families and households that can increase production at home, thereby contributing to creating jobs and increasing incomes for people. With the current import tax rate of 20 percent, the price of imported chicken is still lower than the production cost.

Based on the information as mentioned above, the Ministry of Finance stated that the tax rate of 18 percent corresponds to the first year of reduction in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Assessing the impact of the option, the Ministry of Finance said that consumers benefit from the tax reduction due to the reduction in product prices. In case of tax reduction from 20 percent to 18 percent, taking the import turnover subject to MFN tax (normal preferential import tax rate) in 2018, it is expected to reduce the revenue by $3 million, equivalent to VND 69 billion/year.

Besides that, the reduction of MFN tax, not only the US will enjoy it, but also Brazil and Poland will enjoy the following preferential treatment, which can also lead to an increase of import goods not only from the US, Brazil, Poland, but also other markets that have not exported to Vietnam before.

For fresh or chilled pork, the US Department of Agriculture proposed to reduce import duties on for fresh or frozen pork (except for the whole or half carcasses, ham and shoulder) with HS code is 0203.19.00 from 25 percent to 18.9 percent in 2020 and 0 percent in 2027.

According to statistics of the Animal Husbandry Association of Vietnam for the period of 2016 - 2019, Vietnam ranked 6th in the world in terms of pork production and 7th in the world in terms of slaughter pigs. Currently, there are 85 percent of herds in the whole country, the number of pigs destroyed was about 15 percent. In the case of shortage of pork, Vietnam would expand the size of repopulation and compensate by increasing the production of cows, goats and chickens. The increase in importing pork in the medium and long term was unpredictable, but in the short term, domestic livestock could still meet the demand. Moreover, Vietnamese consumers were not familiar with imported pork and are still using domestic pork.

Accordingly, the Ministry of Finance planned to reduce the tax rate of fresh or frozen pork (except for the whole or half carcasses, ham and shoulder) with HS code is 0203.19.00 from 25 percent to 22 percent. This tax rate was close to the reduction of tax rate in 2019 under the CPTPP of 21.6 percent, as the MFN Tariff did not have a tax rate of 21 percent, so the tax rate of 22 percent was set.

Assessing the impact on the state revenue, the Ministry of Finance said that, at present, there is almost no import turnover applying the MFN tax rate so the adjustment of the tax rate would not affect State revenue. However, the reduction of MFN tariffs has led to an increase in imports, which could increase state revenue.