Import tax cuts, applied to cool inflationary pressures by lowering the end prices paid for goods by consumers, have yet to have their expected impact because goods imported before the cuts took effect are still being sold at the old prices.
 |
|
Customers go through the checkout at a supermarket in the capital. Import tax cuts, applied to cool inflationary pressures by helping importers and distributors lower retail prices of goods, haven’t yet had their expected impact because supplies of goods imported before the cuts took effect are still being sold at the old prices. |
Import tax cuts, applied to cool inflationary pressures by lowering the end prices paid for goods by consumers, have yet to have their expected impact because goods imported before the cuts took effect are still being sold at the old prices.
The Ministry of Finance announced tariff cuts of 10-50 per cent on August 8 on more than 100 classes of goods, including foodstuffs, animal feed, and construction materials, after inflation hit an annualised rate of 8.39 per cent in July, threatening to outpace GDP growth rates for the year.
However, the prices of many common products factored into the consumer price index (CPI), including meat, dairy products, eggs and vegetable oil, have not seen any adjustments since the August 8 cuts in import taxes.
Major retailers, including Big C, Intimex, Fivimart and the Phu Thai Group, said that they had not yet received any announcements of price decreases from suppliers or distributors.
The import tax on dairy products was lowered from 30 per cent down to 15 per cent, but the prices of most products, including Mead Johnson, Abbott, Dumex and Nestle infant formulae, have remained high. A 900g can of Enfapro A+, for example, still retails for VND242-248,000.
Milk producers said that their products would not be affected much by the tariff cuts because of the increasingly high cost of raw materials, currently double that of last year. Producers have raised prices by about 10 per cent.
"We are not earning any profits from the new policy. If the raw material price doesn’t drop, we’ll have to raise prices again," said Tran Bao Minh, Vinamilk’s deputy general director.
Import duties on meat products were also slashed from 30 per cent down to 12 per cent but suppliers have yet to announce price cuts.
Duties on steel ingot were reduced from 10-12 per cent down to 5-10 per cent, and on pig iron from 5 per cent to 2 per cent. But prices remain high and steel makers explain it is because the costs of transportation, warehousing, and other logistics services have not decreased.
Meanwhile, many importers explained that they could not yet reduce prices because the products now on sale were those imported before the tax reduction took effect.
New products imported from
Windfall profits?
Analysts have said that the tax reductions would benefit importers first before trickling down to consumers. Importers would be able to reduce the prices of many items without incurring additional losses or expense, but most seem content to momentarily enjoy the windfall of lower tax costs.
Hoang Huong, director of Huong Thuy Trading Co, the importer of over 250 different food products, said the company planned no price decreases. She said that the tax reductions only applied to some import items, none of which were imported or distributed by Huong Thuy.
However, the company imports butter and dairy products, which are among the items on which taxes have been lowered.
A can of baby formula, subject now to a tax of 10 per cent rather than 20 per cent, should sell for about VND15,000 less.
The director of the Ministry of Finance’s Price Management Bureau, Nguyen Tien Thoa, said that the State had no authorisation to force importers and distributors to cut prices but expected their awareness and willingness to participate in an official effort to ease inflation.
Thoa and other officials were highly concerned that some companies might be simply absorbing the lower tax rates into their own bottom lines, without passing savings on to consumers.
(Source: VNS)
