Ministry of Finance explains about price and import tax of gasoline and oil

(Baonghean) - The Ministry of Finance has just issued a notice on domestic selling prices and import tax on gasoline. Accordingly, the Ministry of Finance has answered questions raised by public opinion surrounding this issue.

How does Vietnam's current gasoline price compare to other countries in the region? Why are gasoline prices in other countries in the region higher than ours?

Ministry of Finance:According to Global Petrol Price.com, Vietnam's retail gasoline price on March 16, 2016 ranked 27th out of 180 countries, lower than all three countries sharing the same border and Thailand. Specifically: Vietnam's gasoline price is 0.65 USD/liter, lower than Cambodia's 0.79 USD/liter, Thailand's 0.88 USD/liter, China's 0.91 USD/liter, Laos's 1.17 USD/liter. Thus, it can be seen that Vietnam's gasoline price is lower than other countries in the region.

The reason why the countries in the region are higher than ours is mainly because their tax and fee structure in the price of gasoline is higher because imported gasoline has the same price as the world (for example, if imported from Singapore, it has the Singapore Platt price - the average daily transaction price announced by Platt's News Agency), the conditions for importing gasoline of the countries in the region, especially the 3 countries that share the border with Vietnam are basically the same, but Vietnam's gasoline price is only 82.3% of Cambodia's gasoline price, 73.9% of Thailand's gasoline price, 71.4% of China's gasoline price and only 55.6% of Laos's gasoline price.

Currently, there is a difference in import tax between different markets due to the Free Trade Agreements (FTAs) we signed, specifically there is a difference in tax rates according to MFN and FTA, and how does the Ministry of Finance handle these issues?

Ministry of Finance:To date, Vietnam has signed 11 free trade agreements within and outside the region. According to the commitments in the free trade agreements, the special preferential import tax rates for petroleum products are on the path to gradual reduction. The period 2016-2020 is the period in which the special preferential import tax rates for petroleum products are sharply reduced, due to the negotiation and signing of each Agreement at different times, so there are different levels of tax rate reduction commitments and at different times depending on each Agreement. Accordingly, the difference between the preferential import tax rates (MFN) and the special preferential import tax rates under the Agreements is inevitable.

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In 11 bilateral and regional agreements, there are some agreements in which petroleum products are on the "exclusion" list (no reduction obligation). Specifically: in the FTAs: ASEAN-China (ACFTA), ASEAN-Japan (AJCEP), Vietnam-Japan (VJEPA), ASEAN-Australia-New Zealand (AANZFTA), ASEAN-India (AIFTA), Vietnam-Chile (VCFTA), according to the provisions of Clause 2, Article 26 of Circular No. 38/2015/TT-BTC, for imported goods under the Special Preferential Import Tariff but the certificate of origin has not been submitted at the time of customs declaration, the customs declarant shall declare at the MFN or normal tax rate, when submitting additional certificates of origin within the time limit prescribed in the international treaties to which Vietnam is a member, the customs declarant shall declare at the corresponding special preferential tax rate, and shall be refunded the difference in tax paid.

However, there are still some Agreements that have been reduced with special preferential import tax rates in 2016 as follows:

Thus, the preferential import tax rate (MFN) of petroleum products is currently higher than the special preferential import tax rate under these FTAs. However, to enjoy the special preferential import tax rate, imported goods from these countries must ensure the conditions of origin (C/O), transportation conditions...

In fact, not all goods imported from countries that have signed FTAs, and not all goods imported from countries that have signed FTAs ​​are entitled to special preferential import tax rates. Specifically, in 2015, the amount of tax (import tax, VAT, special consumption tax) collected from imported petroleum was 35,923 billion VND, but the actual amount of tax refunded according to the documents that enterprises submitted additional C/O form D (according to the Atiga Tax Schedule) was 3,502 billion VND, accounting for 9.75% of the total tax paid. However, this import tax refund figure is only preliminary because it can continue to be refunded in the following months.

In order to reduce the difference between the preferential import tax rate (MFN) and the special preferential import tax rate from FTAs ​​of petroleum products, according to the provisions of the Law on Export Tax and Import Tax, the Ministry of Finance issued Circular No. 48/2016/TT-BTC dated March 17, 2016, effective from March 18, 2016 (date of announcement), stipulating the preferential import tax rate (MFN) for petroleum products as follows:

-Gasoline: Maintain the 20% rate, because the special preferential import tax rate according to the Atiga Schedule is 20%, only the special preferential import tax rate according to the Vietnam-Korea Schedule is 10%, but it is a newly regulated rate, in reality, gasoline imported from Korea is not much and there is no information about C/O certificate of origin for this type of imported goods.

-Diesel oil, kerosene, fuel oil, aviation fuel: Reduced from 10% and 13% to 7%, because in reality, imported goods from Singapore and Korea to Vietnam require additional transportation and insurance costs, accounting for about 6-7% of the price of imported gasoline, equivalent to a preferential import tax rate of 7%.

The regulation of preferential import tax rates (MFN) for gasoline and oil in Circular No. 48/2016/TT-BTC mentioned above has basically ensured the interests of consumers, businesses and the State.

In addition, regarding the import tax rate in the basic price structure for managing domestic retail prices of gasoline and oil calculated according to the preferential import tax rate (MFN), there are opinions that it creates profits for gasoline and oil businesses. Regarding this issue, the Ministry of Finance has the following opinion: As discussed above, not all imported gasoline and oil are imported from countries that have signed FTAs, and even imported goods from countries that have signed FTAs ​​are not all entitled to special preferential import tax rates under those FTAs; in addition, imported goods from Singapore and South Korea to Vietnam require additional transportation and insurance costs accounting for about 6-7% of the imported gasoline and oil price. However, because the preferential import tax rate (MFN) is higher than the special preferential import tax rate in some FTAs, the import tax rate calculated in the basic price for managing retail prices of gasoline and oil is calculated according to the preferential import tax rate (MFN), which is no longer appropriate at this point.

Along with the adjustment to reduce the preferential import tax rate (MFN) for petroleum products, the Ministry of Finance has coordinated with the Ministry of Industry and Trade to report to the Prime Minister, and the Prime Minister has agreed with the plan to determine the import tax rate calculated in the base price for managing retail prices of petroleum products according to the weighted average of the Tariffs (MFN and FTA), the proportion of petroleum imported from countries signing the FTA Tariff is determined quarterly (using data from the previous quarter to calculate for the following quarter) compiled by the General Department of Customs, determined through the electronic customs system (ensuring accuracy and reliability). Using the weighted average import tax rate will ensure that it is close to the reality of imported goods from different sources of petroleum enterprises, ensuring national energy security and ensuring the interests of consumers, enterprises and the State.

The Ministry of Finance has informed the mass media of the above specific information to promptly provide information and orient public opinion to agree with the policy of managing gasoline and oil prices according to the market mechanism under State management./.

Red River