Vietnam Introduces Tax on Exports of Rice, Fertilizer

By Nguyen Kieu Giang

July 22 (Bloomberg) -- Vietnam, the world's second-biggest rice exporter, will introduce its first tax on shipments of the grain and on fertilizer to ensure sufficient domestic supplies.

The tax will be as much as 2.9 million dong ($173) for rice that costs $1,300 a metric ton, according to a statement from Prime Minister Nguyen Tan Dung posted late yesterday on the government's Web site. The release didn't say when the charge would take effect.

Rice-producing nations have curbed shipments this year amid concern there may be a shortage, triggering increased competition for supplies. Vietnam is battling the fastest inflation in more than 16 years, spurred by surging food and energy costs.

The tax on rice shipments ``would tighten the supplies available from the world market,'' David Cohen, director of Asian economic forecasting at Action Economics, said by phone from Singapore. ``Soaring prices of rice from Vietnam had been a key contributor to inflation accelerating in the region.''

Rough-rice futures in Chicago have dropped 30 percent from a record in April. The most active contract for delivery in September, which touched the all-time high of $25.07 per 100 pounds on April 21, fell 0.5 percent today at $17.52.

Vietnam barred the signing of new rice-export contracts between April and June, contributing to the surge in prices. China, the world's largest grain producer, also boosted export duties on fertilizer shipments from April.

Ensuring Demand

Vietnam is taxing rice and fertilizer exports for the first time ``so that we can ensure supply and demand within the country,'' said Mai Thi Thu Van, head of tax at the Ministry of Finance in Hanoi.

The country is currently only meeting about 60 percent of its fertilizer needs, she said.

The charge on the so-called SA and DAP types of fertilizer will be 4,000 dong per kilogram, while urea and kali will be taxed at 5,000 dong per kilogram, today's statement said. DAP stands for diammonium phosphate.

Higher rice prices are making food more expensive for the 85 million Vietnamese. The consumer price index rose 26.8 percent in June from a year earlier, and prices in the food category that includes rice rose 45.6 percent. The General Statistics Office in Hanoi may release prices this month as early as July 25.

The government yesterday raised retail prices for gasoline by 31 percent, and kerosene by 44 percent because of higher oil prices.

The Southeast Asian nation exported rice worth $1.5 billion from January to June, almost double the same period a year earlier, according to the GSO.

Rice that costs between $600 and $700 per ton will be taxed at 500,000 dong per ton, yesterday's statement said. The levy will increase to 600,000 dong for exports of between $700 and $800 a ton, it said.

To contact the reporter on this story: Nguyen Kieu Giang in Hanoi at giang1@bloomberg.net