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MOF plans milk tariff adjustments, sparking fears
In the wake of investigations that revealed huge markups on the prices of imported infant nutrition products, the Ministry of Finance (MOF) is considering adjusting tariff rates on dairy imports. Experts say tinkering with milk tariff rates misses the point: the ministry should control dairy products’ prices to deter excessive profits.
MOF has suggested alternative approaches to tariff adjustment as follows:
Proposal #1: Keep the tariff rate unchanged for milk powder with no sugar or other sweetening substances at three percent. Dairy products with sugar or other components which do not exist in natural milk, the ones used in healthcare, which are now taxed at from five to ten percent, will have a single rate of seven percent.
Proposal #2 (favored by MOF): Raise the tariff rate on milk powder with no sugar or other sweetening substances from three percent to fivepercent. Dairy products used in healthcare will be kept at five percent. Meanwhile, imported dairy products with sugar or other components which do not exist in natural milk will be taxed at seven percent instead of seven to ten percent.
Tuoi Tre Daily polled a number of experts.
Ho Tat Thang, Deputy Chairman of the Vietnam Consumer Protection Association (Vinatas): MOF should not give dairy product sellers a pretext to raise prices.
Recently, dairy suppliers have cut commissions for sales agents, which has prompted the agents to spontaneously raise retail prices so profit will be unchanged. Dairy tariff increases will incite sellers to raise retail prices further. It is quite possible that the tariff rate adjustment will lead to price increases.
Vinatas does not protest the plan to adjust the tariff, which can help increase revenues to the state budget. However, we think that we should not raise it at this moment. We need to amend current regulations to control milk prices before we make any move that may drive up prices further.
Vu Van Truong, Director of the Tax Policy Department of the Ministry of Finance
Currently, milk powder products do not have big differences in processing but have quite different tariff rates. That is really unreasonable and needs adjustment, so the ministry has suggested two plans to adjust the tariff rates on some kinds of milk power products
In the document sent to VInatas and agencies to consult about the plan to adjust tariff, we clearly stipulated that we plan to raise some tariff rates but to reduce others.
We believe that the impacts from the tariff increase will be inconsiderable, and not lead to the dairy product price increases. The import cost of some kinds of milk will rise by less than 100 dong. Further, because the tariff rate will be unified at the single rate of seven percent instead of seven to ten percent, some kinds of products will enjoy lower tariff rates.
Dr. Nguyen Minh Phong from the Hanoi Socio-Economic Research Institute: Why not set ceiling prices for dairy products?
In principle,tariff rates of two or three percent will not have big impacts on prices. However, it is still necessary to well prepare against possible impacts when we adjust the tariff rates. Especially, we need to anticipate the possibility that retailers will charge more for these products.
There are many loopholes in the dairy market management. We need to fix the loopholes. Currently, government agencies are only authorized to intervene to apply stabilization measures when prices increase for 15 consecutive days and the cumulative price increase is more than 20 percent. This is a loophole that needs to be fixed immediately. Businesses can easily ‘get around’ the regulation.
The State should consider establishing ceiling price levels for dairy products, allowing a fairly high turnover profit of of 20-50 percent. Right now, they now get a profit of 250 percent, which is unacceptable if one considers that other businesses can only dream of getting 15 percent.
Dr. Do Kim Tuyen from the Livestock Husbandry Department: Our tariff is low but still the prices are high
Vietnam applies low tariff rates on dairy imports if compared to the tariff adjustment plan under our WTO commitments. However, there’s a paradox: despite the low tariff, the retail prices remain sky high. The most important thing for the dairy market now is not tinkering with tariffs, but finding a way to control the prices and the quality of the products.
Vinatas has suggested examining dairy imports to find out if the products contain the substances they advertise or not. The result of the examination will help cónumers to decide whether to purchase the products.
vietnamnet, tt
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