1 liter of gasoline will soon have to carry 4,000 VND in tax

The Ministry of Finance has just issued Official Dispatch No. 3336/2018 reporting on the explanation and acceptance of opinions on the environmental protection tax schedule after receiving 60 comments, including 14 comments from ministries and branches; 42 comments from localities; 4 comments from associations, enterprises and other organizations.

According to the Ministry of Finance, for gasoline, oil, and lubricants, in the draft Resolution to collect opinions on adjusting the environmental protection tax on gasoline, it will increase from 3,000 VND/liter to the ceiling level within the range of 4,000 VND/liter, an increase of 1,000 VND/liter.

Fuel oil and lubricants increased by 900 VND/liter to 2,000 VND/liter. Grease increased by 900 VND to 2,000 VND/liter. Environmental protection tax on kerosene was adjusted to increase from 200 VND/liter to the ceiling of 2,000 VND/liter.

From July 1, 2018, the environmental protection tax on petroleum products is expected to increase to the maximum level - 4,000 VND/liter.

There are opinions suggesting that there should be a roadmap to increase environmental protection tax by 2020 to suit the economy and people's purchasing power. However, the Ministry of Finance believes that adjusting the tax rate for each taxable commodity in the draft resolution, including gasoline increasing from VND3,000 to VND4,000/liter, is within the framework of environmental protection tax rates and in accordance with the principles of regulating environmental protection tax rates.

With the above adjustment plan expected to take effect from July 1, 2018, according to the Ministry of Finance, the adjustment of environmental protection tax will impact the consumer price index (CPI) in July 2018 (compared to June 2018) by about 0.27% - 0.29% and will impact the average CPI for the whole year of 2018 by about 0.11% - 0.15%.

“However, increasing environmental protection tax will encourage the economical and efficient use of energy and resources; contributing to encouraging the production and consumption of environmentally friendly goods. This will reduce environmental pollution emissions, ensure sustainable economic development, economic development goes hand in hand with reducing environmental pollution and implementing Vietnam's international commitments on environmental protection.

According to the Ministry of Finance, most opinions agree with the draft content, some opinions suggest only adjusting the environmental protection tax on fuel oil from 900 VND/liter to 1,200-1,500 VND/liter so as not to affect the cost of products using this fuel, because fuel oil is the fuel of power plants, glass and ceramic manufacturing enterprises, etc.

However, the Ministry of Finance has commented that fuel oil is a polluting fuel and should be limited in use, so it is proposed to keep the proposed increase in the draft at 2,000 VND/liter.

Many opinions say that the drastic increase in environmental protection tax on gasoline will affect domestic production and business activities, and people will suffer.

The Ministry of Finance also explained the proposed increase.The above mentioned petrol tax is due to the sharp reduction in import tax. On the other hand, the retail price of petrol in Vietnam is basically lower than that of neighboring countries in particular and many other countries in the ASEAN region.

With the above proposed adjustment plan, the Ministry of Finance calculates the total expected environmental protection tax revenue to be about 57,312 billion VND/year, an increase of about 15,684.2 billion VND/year.

Along with the increase in environmental protection tax revenue, the value added tax revenue for these goods will also increase to about 1,568.4 billion VND. At that time, the total state budget revenue is expected to increase to about 17,252.6 billion VND/year.

However, many people, businesses and experts believe that the drastic increase in environmental protection tax on gasoline will negatively impact production and business activities, reduce the competitiveness of businesses and consumers will suffer.

On the other hand, the explanation of the Ministry of Finance’s proposal to increase taxes on petroleum products is that the import tax on petroleum products has decreased and that Vietnam’s petroleum prices are lower than those of other countries in the region, which is not convincing. Moreover, petroleum prices carry too many taxes and fees. One liter of petroleum sold on the market currently has to bear about 7,000 VND in taxes.

Therefore, instead of increasing taxes, the Ministry of Finance must fight against revenue loss, expand the revenue base and especially propose solutions to tighten spending, ensure reasonable spending, prevent waste and loss, and save every penny of people's tax.