Should steel tax adjust?

Regarding the proposal to increase billet export tax, the Vietnam Steel Association [VSA] disagreed, because this policy not only causes more difficulties for enterprises, but also is not suitable with the current situation of the current domestic steel production industry...

Explaining this adjustment proposal, the Ministry of Finance stated that the domestic construction steel price has continuously increased sharply, mainly due to the increase in the price of steel production materials and the steel industry depends heavily on raw materials from outside. The high steel price has greatly affected the progress and disbursement as well as the contingency costs of projects, especially public investment projects; affect input costs of many manufacturing industries.

Stabilizing the market and increasing competitiveness 

In a more detailed analysis, the Ministry of Finance said that the preferential import tax rate [MFN] for some types of construction iron and steel has been applied for a long time with a relatively high level, up to 15%, 20% and 25%.

Therefore, in order to contribute to lowering the price of construction steel products, promoting enterprises to reduce costs, especially in the context of high raw material prices, the Ministry of Finance submitted to the Government a plan to adjust the export tax rate for billets and MFN import tax rates of some types of iron and steel.

Specifically, in the draft Decree amending and supplementing a number of articles of Decree 57/2020/ND-CP dated May 25, 2020 of the Government related to the preferential import and export tariff, the Ministry of Finance has submit to the Government to increase the export tax rate for billet products [groupoff 72.06 and 72.07] from 0% to 5%, and at the same time reduce the import tax rate for some construction steel products to from 10 - 15%.

Following the plan to increase export tax on billets, and at the same time reduce import taxes on some steel products, it will contribute to stabilizing the supply of billet for the domestic market, stabilizing prices in the market and limiting the export of billet to keep domestic production, ensure the sustainable development of the steel industry in the long term.

Regarding MFN import tax on some steel products, in order to contribute to reducing input steel prices, the Ministry of Finance proposed the Government to reduce the MFN import tax rate for some steel products.

Accordingly, the MFN tax rate for reinforced concrete steel in groups 72.13, 72.14, 72.15 will be adjusted down from 20% to 15%; angle bar, mold and shaped steel of group 72.16 and serrated steel of group 72.13 from 15% down to 10%. For flat-rolled non-alloy steel of  8 product codes of group 72.10, the reduction from 20% and 25% down to 15%.

According to the assessment of the Ministry of Finance, the adjustment and reduction of import tax rates for some of the above-mentioned products have some effects on reducing state budget revenue, but the expected impact is not large due to the import demand. The current export of these iron and steel is not high. These are steels that can also be produced domestically and basically meet the demand.

However, this adjustment will contribute to promoting domestic steel manufacturing enterprises to invest and innovate technology to reduce product costs and increase competitiveness for imported steel products. In addition, the adjustment will contribute to stabilizing the domestic market, and at the same time, promoting the steel industry to develop sustainably.

Before the proposal of the Ministry of Finance, VSA had Document 41/2021/HHTVN replying to the Ministry of Finance about commenting on the draft Decree amending and supplementing a number of articles of Decree 57.

Accordingly, VSA and Vietnamese steel manufacturers have proposed to the Ministry of Finance not to increase export tax on billet products of groups 72.06 and 72.07 and not to reduce MFN import tax on finished steel products belonging to groups of 7213, 7214, 7215, 7216 and 7210.

Enterprise will meet more difficulties 

In the document, VSA clearly stated that the Finance Ministry's proposal to adjust export and import taxes on iron and steel products is not suitable with the current situation of the domestic steel industry.

The reason is that since the outbreak began at the end of April until now, many localities across the country have implemented social distancing in accordance with Direction15, Direction 16 of the Government. Therefore, the basic construction work from industrial to civil has stalled, domestic steel consumption has decreased sharply.

Specifically, domestic sales of finished steel products in June 2021 decreased by 20% compared to May 2021 and increased by only 1% compared to the same period in 2020, if excluding the growth of hot rolled steel, domestic sales decreased by 28% and 22% respectively.

Generally in the first 6 months of 2021, the growth of the steel industry [domestic finished steel sales increased by 18%, while exports grew by 66%, if excluding the growth of hot rolled steel] is to inherit the continuous efforts of the steel industry in 2020.

Currently, steel export is a direction to expand the market to continue maintaining production and business, ensuring jobs for factory workers, maintaining economic development, and bringing revenue to enterprises and land. countries in the difficult context due to the complicated developments of the epidemic.

In the past 10 years, the trend of protecting the steel industry has increased worldwide, even in developed countries such as the US, EU, Japan... to protect the domestic steel industry. Vietnam's steel industry is gradually developing synchronously and modernizing to improve the competitiveness of the steel industry.

In that context, the adjustment and reduction of import tax on domestic steel products [which have fully met domestic demand and partly exported] will cause steel to flood in from outside, threatening the production activities ofdomestic enterprises which meet many difficulties.

Moreover, with the free trade agreements Vietnam has, is and will sign with countries and regions, it has been a challenge for the Vietnamese steel industry, especially with blocks such as the Comprehensive Partnership Agreement and Trans-Pacific Progress or the Regional Comprehensive Economic Partnership Agreement are areas where steel-producing powers such as China, Japan, etc. Therefore, the tax adjustment is like the draft Amendment Decree will increase difficulties for domestic steel producers.

According to VSA, the import-export tax policy in general and the steel export tax are long-term policies that contribute to promoting the domestic manufacturing industry, including the steel industry, as well as the domestic economic sectors to develop sustainably. rather than a short-term solution to deal with temporary market ups and downs. VSA's view is that the Government needs to have a consistent policy to protect the domestic manufacturing industry.

In this document, VSA also said that in the domestic market, the price of finished steel products is decreasing day by day, lower than that of other countries in the region and the world. Future domestic steel prices will still be affected by world market prices. Therefore, if the new policy is applied, it will increase the existing pressure on domestic steel producers, even some steel producers may go bankrupt.

Source: satthep.net