Why is there a need to tax rice exports?

The government can increase rice export tax when the domestic rice price is too high to reduce the amount of rice exported and vice versa. Moreover, when domestic prices are high, taxes can be adjusted to boost exports and help domestic rice consumption.

Why is it necessary to tax rice exports?

Vietnamese rice quality/export risks Not only in Vietnam but many other countries around the world such as India and the EU are still competing on rice export taxes. This is a measure that is considered effective in keeping domestic rice prices stable, easier to apply than imposing quotas on farmers. At the beginning of 2010, farmers and businesses and business shops faced the risk of exporting rice such as big losses because of the export suspension order. Therefore, farmers have to sell rice at low prices and buy imported materials: fertilizers, pesticides, and gasoline at expensive prices. Many businesses speculate and hoard food and get rich from selling supplies. The great damage to many traders is the high price of rice in the international market, many customers want to buy rice but do not dare to sign contracts. Therefore, the urgent measure that needs to be enacted is the Vietnamese rice tax. To comply with the provisions of WTO and AFTA, the export tax on rice in general and agricultural products in particular must be reduced according to a strict schedule, until it is only 0-5%. Many developing countries need agricultural protection, but due to lack of competitiveness, they cannot use tariff instruments. The Vietnamese rice tax helps businesses and shops comply with the regulations set by the state, reducing losses when exporting to major markets around the world. Therefore, this is like a product insurance fund, helping to stabilize the quality of Vietnamese rice, bringing a great source of income for businesses. At the same time, when using this fund, it will also help reduce people’s losses due to the high price of rice, when the price is adjusted, the government will set a floor price for people and businesses to buy temporarily stored rice at the floor price.

Rate of tax levied on rice exports in Vietnam

Rice export tax is regulated by progressive export price and absolute level. If the export price is from 600 to less than 700 USD/ton, then that enterprise needs to pay tax of more than 500,000 VND/ton, which is about 5% of the export price. As for the price from 700 to less than 800 USD/ton, enterprises have to pay tax of 600,000 VND/ton…, the highest is 2,900,000 VND/ton if the price is from 1,200 to 1,300 USD/ton. Currently, businesses usually export at a price of 600-630 USD/ton of 5% broken rice. In addition, each enterprise can only sign a contract to export rice at the price of 599 USD/ton instead of 600-620 USD/ton, so as not to pay tax of 500,000 VND/ton ($30/ton). So the State will not collect taxes and farmers will not have to accept the low price of rice.

Rate of tax levied on rice exports in other countries

According to the report of the Indian Ministry of Finance under No. 49/2022-Customs issued, the application of export tax on rice to other countries also aims to limit export risks. In India, there is currently an export tax of 20% on some types of rice such as: paddy (HS 100610), brown rice (HS 10620) and other rice types except parboiled rice, Basmati rice (HS 10063090), this decision has come into effect since September 9, 2022. The issue of this country’s export tax limit has hit a stronger blow to countries struggling with a crisis of living and severe hunger. This tax has caused many importers to leave India to find Vietnam and Thailand, helping Vietnam open up many opportunities for traders in the market. Nguyen Dang Nghia, former director of the Southern Center for Soil, Fertilizer and Environmental Research, said that not only India, but now the supply of rice in many rice exporting countries is decreasing. Therefore, the imposition of a 20% tax on exported rice will open up great opportunities for Vietnam. Mr. V.K Rao, chairman of the Indian Rice Exporters Association, said the government’s move will boost global rice prices and white rice will reach US$400 a tonne. Indian exporters will ask the government for a tax exemption on about 2 million tonnes of rice that has been contracted for export but has not yet been shipped. Furthermore, the Commission’s (EC) report No. 972/2006 stipulates that the EU rice export tax rate will be EUR 65/ton.

Taxing rice exports is a necessary job to help each business reduce risks, bring safe and reputable Vietnamese rice quality to international consumers.