With duties cut, will prices go down?

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With duties cut, will prices go down?

The Ministry of Finance has issued decisions reducing import duties levied on over 20 categories of goods in an effort to cool inflationary pressures, but whether prices will go down still remains to be seen.

The duties on many categories of goods have been reduced by half or more. Businesses, however, are doubtful that the new measures will have much significance.

"Taxes only account for a small part of the prices of our products," said Viet Nam Dairy Products Joint Stock Company (Vinamilk) deputy general director Tran Bao Minh. "Meanwhile, now we have to import materials at a cost nearly double that at the beginning of the year [US$5,200 per tonne compared with $2,700]."

For steel makers, cutting prices at the moment seems impossible, as the prices of steel ingot have increased rapidly. Ingot costs have reached $500 per tonne, up $60-70 per tonne over last year’s average.

"The price of steel ingot can be reduced only $15 per tonne as the import duty applied has been reduced from 5 per cent to 2 per cent – it’s not very significant," said Viet Nam Steel Corporation’s marketing department deputy director Le Thiet Hung.

Prices of foodstuffs are not likely to go down, according to Vissan Company general director Bui Duy Duc, who explained that supply is now scarce on both the home and world markets.

Duc gave pork as an example: the local supply has been reduced due to an epidemic, and on the world market, China is also a big importer, so it’s not easy to maintain a sufficient amount from imports to meet domestic demand.

The Ministry of Finance, however, sees the situation differently.

"We believe that the tax policy will help improve the current situation," Deputy Minister of Finance Truong Chi Trung said yesterday at a press conference discussing measures to stabilise market prices.

"All of those categories of goods with reduced import duties] previously had high tax rates imposed, so now with many articles seeing duties cut in half or more, prices will decrease considerably," he said.

Trung stressed the importance of maintaining strict controls over companies artificially setting prices, saying the ministry had set up groups of inspectors to check large steel and gas companies next week.

"Managing prices will be a key task in the final months of the year," he said.

A set of financial and monetary measures would also be carried out to curb inflation, Trung said.

The CPI has increased 6.19 per cent since December, according to the General Statistics Office. Inflation can increase by no more than 0.4 per cent per month over the rest of the year to keep inflation for the whole year below the GDP growth rate.

Source: Vietnam News