Ministry of Finance proposes some measures to control inflation

In the near future, the Ministry of Finance is also planning to continue submitting to the Government and the National Assembly Standing Committee a number of tax reductions and price management solutions related to gasoline to limit the inflationary spiral.

Measures taken

Contrary to the expectations of many international organizations for a strong economic recovery in 2022, the global economy is facing many major impacts from the double shock of the Covid-19 pandemic and the Russia-Ukraine conflict.

Most recently, the World Bank has sharply lowered its growth forecast for developed economies to 2.6%. Meanwhile, developing and emerging economies are only forecast to grow by 3.4%. Globally, the World Bank has lowered its economic growth forecast for this year by 1.2 percentage points to 2.9%.

While global growth forecasts have repeatedly warned of a downward trend, inflation has continued to rise. The International Monetary Fund said that inflation in developed economies will be 5.7% this year, while in developing and emerging economies it will be 8.7%, significantly higher than previously forecast.

Gasoline prices are rising. Photo: Internet

Data from countries announcing CPI in April 2022 and May 2022 shows that inflation in many countries continues to be high: US CPI in April 2022 increased by 8.3%, continuing to be the highest in the past 40 years, Eurozone CPI in May 2022 increased by 8.1%, 4 times higher than the European Central Bank's target inflation of 2%. In Asia, South Korea's CPI in May 2022 increased by 5.4%, Thailand's increased by 7.1%, Indonesia's increased by 3.55%; China's CPI in April 2022 increased by 2.1%, faster than expected compared to the target inflation of 3% in 2022, Singapore increased by 5.4%,

In Vietnam, the CPI in May 2022 increased by 0.38% compared to the previous month, and by 2.86% compared to the same period last year. On average, in the first 5 months of 2022, the CPI increased by 2.25% compared to the same period last year, higher than the 1.29% increase in the first 5 months of 2021, but lower than the increase in the first 5 months of 2017-2020.

To stabilize the market, in the period before and after Tet, in June 2022, the Ministry of Finance issued directives and dispatches to ministries, branches and localities to strengthen management, operation and quickly stabilize market prices, promptly control inflation. As soon as there were signs of inflationary pressure, many policies were promptly adjusted such as reducing VAT by 2%; reducing environmental protection tax on aviation fuel by 50% - 70%, reducing environmental protection tax on petroleum products by 50% - 70%, reducing the collection rate of 37 fees and charges in the first 6 months of 2022 according to the provisions of Circular No. 120/2021/TT-BTC; at the same time flexibly using the Price Stabilization Fund; continuing to extend the deadline for tax and land rent payment; strengthening inspection and control of gasoline supply and demand to prevent hoarding, speculation and price manipulation activities.

Thanks to the above timely solutions, the average CPI in the first 5 months of 2022 increased by 2.25%, there is still room to control inflation for the whole year according to the National Assembly's target of 4%.

Direction of inflation control in the coming time

In the context of the continuous increase in domestic and foreign gasoline prices recently, the Ministry of Finance is coordinating with relevant agencies to study the possibility of continuing to reduce environmental protection tax on gasoline products to contribute to timely curbing inflation.

Deputy Minister of Finance Nguyen Duc Chi said that the Ministry of Finance is currently planning to propose to the National Assembly Standing Committee within its authority to minimize environmental protection tax on gasoline.

In addition, recent developments show that the world petroleum market will continue to have many unpredictable and difficult-to-forecast fluctuations, potentially affecting our country's petroleum supply. Accordingly, on April 21, 2022, the Ministry of Finance issued Official Dispatch No. 3662/BTC-CST to request opinions from relevant ministries, branches, associations, and enterprises on the draft Decree on Export Tariffs and Preferential Import Tariffs, in which it is proposed to reduce the preferential import tax rate on gasoline from 20% to 12%. The reduction of the preferential import tax rate (MFN) on gasoline according to the plan is expected to contribute to diversifying the supply of petroleum (avoiding being passive due to dependence on imports from Korea and ASEAN), while ensuring the difference is consistent with the tax rates under the Free Trade Agreements that Vietnam has signed. Currently, the Ministry of Finance is synthesizing opinions of units and submitting them to the Government in the coming time.

To proactively respond to challenges in price management in the remaining 7 months of 2022, ministries, branches and localities need to proactively promote the implementation of solutions directed by the Government, focusing on the following measures: (1) Continue to implement proactive and flexible monetary policies in close coordination with fiscal policies and other macroeconomic policies to control inflation according to the set targets;

(2) Strengthen the work of synthesizing, analyzing, forecasting, and developing scenarios and response plans for each commodity in case the goods on the world market continue to increase to manage domestic production, balance and regulate supply and demand, and stabilize prices appropriately;

(3) Focus on removing difficulties for production and business to fully prepare the supply of goods to meet consumer demand, facilitating the circulation and distribution of goods and services;

(4) For goods and services whose prices are set by the State and not yet subject to price adjustment, continue to maintain price stability to ensure general inflation control as well as contribute to supporting businesses and people; (5) Provincial and municipal People's Committees shall carry out state management of goods according to their authority, strengthen inspection and supervision of implementation of price declaration and price posting measures; publicize price information; strictly handle cases of speculation, hoarding and unreasonable price increases; (6) Continue to focus on information, propaganda, and transparent disclosure of price information to control expected inflation; limit false information that causes confusion for consumers and destabilizes the market.

Kim Chung