Joint Circular No. 16 LB/TC-VG guiding the calculation of the markup discount circulation surplus

JOINT CIRCULAR

Guidelines on calculating the premium and discount for circulation

  Implementing Decision No. 361/CP dated October 5, 1979 of the Council of Ministers regarding improvements to certain policies on purchasing, distribution, and pricing, in the field of purchasing and selling there are various types of prices with significant price differences:

- In the purchase price, there are directive prices and negotiated prices

- In the retail price, there are supply retail prices, free retail prices (at high prices), and negotiated prices.

Therefore, accurately determining the level of premiums and discounts has a significant impact on setting transaction prices between economic units as well as in forming selling prices.

Currently, premiums and discounts for circulation are calculated as a percentage (%) based on the current directive price; for agricultural products, it is based on the average directive purchase price (except for live pigs, which are based on the standard purchase price of 1,650 dong per ton), for industrial goods, it is based on the central system I retail price (excluding fuel, which is based on the external trade delivery price of 280 dong per ton), for dual-priced items, it is based on the same-level retail price... Generally, these discounts and premiums have ensured necessary costs for circulation organizations.

Implementing Government Council Decision No. 361, purchase prices and retail prices are adjusted upwards. If the old percentage rates for premiums and discounts are applied to the new prices, the absolute amounts of premiums and discounts will exceed the actual necessary levels for circulation, leading to waste and unreasonable chain effects on raw material procurement prices, product costs of industry and handicrafts.

To ensure realistic, reasonable, and profit-making levels of premiums and discounts for business organizations, timely implementing Decision No. 361/CP, after reaching consensus with relevant sectors, the Joint Ministry of National Economy - Ministry of Finance provides guidelines for calculating premiums and discounts in purchases, wholesale, and retail sales according to the following principles:

1. The current premium or discount rate shall not be applied to the new price.

2. The absolute amount of the premium or discount due to the new price is determined by the current absolute amount of the premium or discount being formed now (i.e., the current premium or discount level = the old purchase price or retail price (before Decision 361/CP) multiplied (x) by the current percentage (%) of premium or discount, in the North according to Circular No. 93-TT/LB (Trade, Finance, State Bank) dated April 16, 1970), plus the additional amount of the increase in value of losses and bank loan interest payments due to price increases (purchase price or retail price) according to Government Council Decision No. 361/CP dated October 5, 1979.

This principle stems from the fact that in the structure of circulation costs, major components such as transportation costs, wages, depreciation, purchase costs, management costs... are already covered by the current premium and discount levels, and even if purchase or retail prices increase, these costs remain unaffected. However, for loss costs and bank loan interest payments affected by price changes, they are considered and calculated appropriately.

Based on this principle, the new premium and discount levels are determined as follows:

Example: The soybean purchase price before adjustment: VND 1,07/kg

- New purchase price after adjustment:                              VND 2,15/kg

- Industry-wide TSTN rate according to Circular 93 for the Northern region:                        16,4 %

- Industry-wide TSTN level based on the old price: VND 1,07 x 16.4% = VND 0,175

- Loss and interest rate on bank loans calculated on turnover: 1.18% (of which: loss = 0.12%, interest = 1.06%)

- Increase in purchase price expressed in absolute figures: VND 2,15 - VND 1,07

- New TSTN level = (VND 1,07 x 16.4%)  +  (1.18% x VND 1,08)  =    VND 0,188

And the formula for calculating the percentage of the new TSTN or discount based on the new price is:

new price                                 Purchase or sales volume calculated on the new price

In the above example, the ratio                          0,188

industry-wide TSTN          =       --------------------      =     8,74%

calculated on the new price is:                                     VND 2,15

The State Price Control Commission and Ministry of Finance request:

- All State-owned corporations, first and second-level trading companies to calculate the new TSTN or discount levels for their traded goods based on the above principles, report to the competent authority for review and publication.

It is suggested that relevant ministries and provincial People's Committees guide businesses under their management to recalculate new TSTN and discount levels for goods affected by price changes and organize internal accounting work properly according to current regulations. Provincial Finance Departments and State Price Control Commissions have the responsibility to assist People's Committees in carrying out this work.

This Circular stipulates the principles for calculating TSTN and discounts to serve the implementation of Decision 361/CP of the Government Council. Ministries and localities should report any difficulties encountered during implementation to the State Price Control Commission for study and resolution.

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