Trillion-dollar tax pressure on gasoline prices

Recent regulations on special consumption tax will continue to put pressure on retail gasoline prices in the adjustment period early this month.

Gasoline is about to enter a new retail price management period on September 5. Since the previous management (August 19), the calculation of special consumption tax on gasoline has changed according to the guidance of the Ministry of Finance in Official Dispatch No. 718 dated August 18, when special consumption tax is calculated according to Decree 100 guiding the Law on Value Added Tax, the Law on Special Consumption Tax and the Law on Tax Administration, effective from July 1, 2016.

The change in the way special consumption tax is calculated makes each liter of gasoline 200 VND more expensive than before.

Accordingly, the special consumption tax on this item is calculated based on the output price (including costs) of the manufacturing and importing enterprises, instead of only on the import price as before. In case the selling price of the manufacturing and importing establishments is not according to the normal transaction price on the market, the tax authority shall determine the tax according to the provisions of the Law on Tax Administration.

For petroleum products determined according to Joint Circular No. 39 dated October 29, 2014, the selling price includes: import price (CIF) multiplied by foreign exchange rate, import tax, standard profit, standard cost, price stabilization fund, environmental protection tax, value added tax, special consumption tax, other taxes, fees and deductions as prescribed.

This means that the special consumption tax (10%) is calculated based on the output price (based on the total of other taxes and fees), while the old calculation method was based on the input price of goods.

Calculations by a financial expert show that changing the way special consumption tax is calculated on gasoline will cause the current gasoline price to be "skewed" by nearly 200 VND per liter compared to the old calculation.

“Not to mention, the current tax and fee structure accounts for 49-51% of a liter of gasoline, combined with the current way of calculating special consumption tax, taxes overlap taxes and further increase the tax and fee burden on people,” the expert stated.

Referring to the change in the way of calculating special consumption tax on gasoline, sharing with VnExpress, expert Ngo Tri Long commented that only limited consumption and luxury goods should be subject to special consumption tax. As gasoline is a daily-use item with a large consumption level, the application of special consumption tax on this item should be reconsidered.

"While we have to stimulate consumption and production, we should limit taxes and fees, but we are doing the opposite; taxes and fees are a burden," he commented.

Mr. Long also calculated: with a difference of nearly 200 VND per liter of gasoline due to the calculation of special consumption tax, assuming about 12 million tons of gasoline are consumed each year, consumers will have to spend nearly 3,100 billion VND more (each ton of gasoline is equivalent to 1,270 liters).

"I think the management agency needs to recalculate and should not impose special consumption tax on gasoline," expert Ngo Tri Long emphasized.

However, responding to VnExpress, the leader of the Tax Policy Department (Ministry of Finance) disagreed with this view. Mr. Pham Dinh Thi - Director of the Tax Policy Department (Ministry of Finance) said that according to the provisions of the Law on Special Consumption Tax, each imported item will be subject to many taxes and each tax has different objectives, requirements and scope of regulation. For example, imported goods will be subject to import tax, special consumption tax, environmental protection tax, and value added tax...

Regarding the new method of calculating special consumption tax, Mr. Thi emphasized that it has been stipulated in the amended Law on Special Consumption Tax passed by the National Assembly and the Government has issued Decree 100 to guide its implementation. The Director of the Tax Policy Department also disagreed with the opinion that the new method of calculating special consumption tax is a tax on tax.

“This is essentially a tax on imported goods, the selling price of the importer to avoid transferring prices from abroad to Vietnam,” Mr. Thi commented.

Also expressing his opinion on the new way of calculating special consumption tax, which is making each liter of gasoline nearly 200 VND more expensive, the representative of the General Department of Taxation explained that the difference in each liter of gasoline is not significant and the goal of amending special consumption tax is to bring fairness between imported and domestic goods.

“Increasing 100-200 VND in tax per liter of gasoline is nothing, while we import an average of 10 million tons of gasoline each year and we can solve a bigger problem,” he said.

According to VNE