Statistics from the Ministry of Agriculture and Rural Development showed that domestic rice consumption, which was imposed with a 5 per cent VAT, accounted for less than 15 per cent of the country's total rice output. — VNA/VNS Photo Trong Dat

HA NOI (Biz Hub) — The Prime Minister has approved the Ministry of Finance's decision to not slash the value added tax (VAT) imposed on rice in the domestic market.

Accordingly, the tax rate will be retained at the current level of 5 per cent.

Previously, the Viet Nam Food Association had proposed that the VAT on rice consumed in the domestic market be cut to 0.5 per cent to develop a rice brand in the domestic market.

However, in response to the proposal, the Ministry of Finance said that the existing Law on VAT did not have a 0.5 per cent tax rate. If this tax rate was added, it will not be in line with the VAT reform strategy for the 2011-20 period, aimed at narrowing down the number of subjects for VAT imposition.

The Finance Ministry also said that the proposal was not in line with international practices, which allow zero tax rate only on export products.

Statistics from the Ministry of Agriculture and Rural Development showed that domestic rice consumption, which was imposed with a 5 per cent VAT, accounted for less than 15 per cent of the country's total rice output.

On average, during the 2010-15 period, Viet Nam produced about 22 million tonnes of rice, of which 18.5 million tonnes were not subjected to any tax as they were used for exports and self-consumption. Meanwhile, some 3.5 million tonnes of rice was taxed each year.

Regarding animal feed and fertilisers, the Ministry of Finance has proposed to continue animal feed in the list of goods receiving VAT exemption, while the impact of VAT exemption on fertilisers should continue to be evaluated to raise proposals for amendments to law. — VNS