Price fluctuations when environmental tax on gasoline increases to 4,000 VND

According to the Resolution on the environmental tax schedule for gasoline and oil recently approved by the National Assembly Standing Committee, from January 1, 2019, the environmental tax on gasoline (except ethanol) will increase from VND3,000 per liter to a ceiling of VND4,000; diesel will increase by VND500 per liter to VND2,000. Other oil products such as mazut, lubricants, etc. will increase by VND900 to a ceiling of VND2,000 per liter. Kerosene alone will increase by VND300 to VND1,000 per liter.

Thus, after nearly 4 years of maintaining the environmental tax on gasoline at 3,000 VND per liter, this item will be subject to an additional 1,000 VND.

Compared to the previous plan, the time to apply the environmental tax increase on goods has been postponed to early 2019 so as "not to affect the 2018 CPI".

Government calculations show that with the expected CPI target for 2019 at around 4-5%, the increase in environmental tax will not have a large impact on the consumer price index for the whole year, only at 0.07 - 0.09%.

Environmental protection tax schedule for some gasoline and oil products

Unit: VND

This argument is based on the analysis that gasoline is only one of 11 groups of goods included in the CPI basket and its weight only accounts for 4% of the price of goods compared to other important and essential goods such as food, housing, and construction materials.

For sectors and industries that are expected to be heavily affected by fuel prices such as transportation, electricity, etc., the Government calculated that the impact from this tax increase will not be much. Specifically, transportation fares increased by 0.83% in the 3 months after the price increase; while electricity, glass and ceramic production, etc. were basically unaffected.

The timing of the tax increase from January 1, 2019 is also confirmed by the Government to "ensure feasibility" and only have a low impact on the average CPI in 2019."Because the inflation control target in 2019 will be affected by the average CPI of all months of the year, the environmental tax increase from the beginning of the year will not have much impact on price management and control and inflation control according to the yearly target," the Government's impact assessment report stated.

However, speaking to VnExpress, many experts are concerned when the environmental tax on gasoline increases to 4,000 VND per liter from January 1, 2019.

An expert in the petroleum industry shared that the base price of petroleum (the price calculated by the operator for domestic retail prices) will certainly increase accordingly, pushing up retail prices.This price increase does not include the value added tax of the new environmental tax and the value added tax of all taxes, fees...

According to him, currently, a liter of gasoline has to bear many types of taxes and fees such as import tax, special consumption tax, value added tax, standard profit, standard cost, environmental tax... Compared to other items, environmental protection tax on gasoline and oil still accounts for the majority of the total budget revenue from environmental protection tax, about 95%. In addition, transportation costs in Vietnam are quite high compared to other countries, so if environmental protection tax is increased, gasoline prices will increase, which means business costs will increase. This is also the input of goods, so it will affect production and people's lives.

Many experts are worried that the increase in environmental tax from January 1, 2019 will affect the CPI in the first months of the year. This is the occasion near Lunar New Year, the price of goods is expected to increase following the rain. In addition, according to the law, world oil prices usually start the cycle of increasing from October of the previous year to May of the following year, because at this time, European countries and the US will use a lot of fuel in the winter..., causing some difficulties in stabilizing the price of goods on the market.

However, in the impact report sent to the National Assembly Standing Committee, the Government said that since petroleum is a commodity that uses price stabilization tools, in case this tax increase has a major impact on price increases, the Petroleum Price Stabilization Fund can be used when necessary. If world prices increase in the first quarter of next year, the operator can draw 50% from the Price Stabilization Fund and adjust the price up by 50% during the operating periods during this period.

Dr. Ngo Tri Long said that petroleum is a strategic material for the economy, affecting production, consumption, national security and defense... so increasing taxes will have a significant impact on input costs in all industries. In the context of Vietnam's low competitiveness and low average income of Vietnamese people, this is even more unreasonable.

"I think that we should not use taxes and fees to increase revenue, but many countries often reduce taxes and fees to stabilize the economy and encourage production. Therefore, if management agencies want to have revenue, they must nurture it by creating conditions for the economy to develop well and sustainably. Because a country's budget has contributions from many other types of taxes such as personal income tax, special consumption tax, value added tax, special consumption tax....", he said.

No less than twice this year, the proposal to drastically increase the environmental tax on gasoline and oil was put forward by the Ministry of Finance with the reason that "Vietnam is implementing FTAs ​​and import tax is decreasing very quickly, revenue from environmental tax on gasoline and oil is a source to offset budget revenue". However, this idea was later not approved by the National Assembly Standing Committee at the July session due to concerns about the impact on price levels and macroeconomic stability; as well as the management agency's incomplete assessment of the impact.

At the September meeting of the National Assembly Standing Committee that just ended, this proposal was once again included and supplemented on the last meeting day, after the Government completed the supplementary impact assessment report and sent it to the National Assembly's review agencies two days earlier.

Government statistics also show that state budget expenditure for environmental protection is always higher than environmental protection tax revenue. In the period 2012 - 2017, total budget expenditure for environmental protection was about 158,008 billion VND, while environmental tax revenue was only 150,810 billion VND./.