Increase environmental tax on gasoline and oil from January 1, 2019

On the afternoon of September 20, the National Assembly Standing Committee discussed and voted to approve the draft Resolution on environmental protection tax rates for gasoline and oil.

Accordingly, the environmental tax on gasoline will increase to the maximum of 4,000 VND, an increase of 1,000 VND per liter compared to the current level. Kerosene will be subject to an environmental tax of 1,000 VND per liter from the beginning of next year, an increase of 700 VND compared to the current level.

Environmental protection tax schedule for some gasoline and oil products

Unit: VND

However, compared to the Government's proposal in May, the environmental tax on kerosene has been halved, after receiving comments from the National Assembly Standing Committee.

In addition, environmental tax on lubricants, greases, and fuel oil will also increase to VND2,000 per liter, from the current VND900.

The Resolution takes effect from January 1, 2019, aiming to reduce the impact of price increases of these items on this year's consumer price index, ensuring the Government's target of keeping inflation below 4% in 2018.

Giving his opinion, Mr. Nguyen Van Giau - Chairman of the Foreign Affairs Committee still held the same concerns as the discussion two months ago, when he said that increasing taxes on essential input items such as gasoline and oil will affect prices across the market. Agreeing to pass the draft Resolution on environmental tax rates for gasoline and oil, the Chairman of the Foreign Affairs Committee suggested that for items that have an impact on the market, the Government should have a full impact assessment, including social effects, which would be more comprehensive and complete.

According to Vice Chairman of the National Assembly Phung Quoc Hien, if this tax is adjusted, the budget will have more than 15,700 billion VND each year, with resources to invest and handle environmental issues. He proposed that in the 2019 budget estimate, revenue from environmental tax will be used for environmental protection.

Agreeing, National Assembly Chairwoman Nguyen Thi Kim Ngan said that environmental tax money must be put into the budget and spent on environmental protection, so that people "will see fairness, not just collecting from one place and spending from another."

Faced with concerns that increasing environmental taxes on gasoline and oil - essential input materials for production - will impact inflation, Mr. Nguyen Duc Hai - Chairman of the Finance and Budget Committee said that the Government has received and has a full supplementary impact assessment report.

Mr. Hai analyzed that the Government's proposal to change the effective date of the Resolution from January 1, 2019 will not increase the CPI in 2018, ensuring room for the Government to adjust inflation in 2019, thereby minimizing the impact on people's lives and economic activities.

Gasoline prices only impact 0.07 - 0.09% of the CPI in 2019 because gasoline is only 1 of 11 commodity groups included in the CPI calculation basket and the weight only accounts for 4% of the price of commodities.

Not to mention, the retail price of gasoline in Vietnam on September 10 was low compared to countries sharing the same border, in ASEAN and Asia, such as 5,318 VND per liter lower than Laos, 1,773 VND per liter lower than Cambodia, 1,499 VND per liter lower than China...

On the other hand, with the plan to increase environmental tax on gasoline to 4,000 VND per liter, the tax rate on the base price of gasoline in Vietnam is about 39%, still lower than the tax rate on gasoline prices in countries in the region, such as Cambodia 49%, Laos 56.5%, China 52%...

The Chairman of the Finance and Budget Committee also said that the adjustment to increase environmental tax on gasoline and oil only caused transportation fares to increase by about 0.83% in the 3 months after the price increase of other goods. There was basically no impact on electricity, glass and ceramic production...

The proposal to increase environmental protection tax on gasoline and oil was proposed by the Government at a meeting in mid-July, but after discussion, the opinions of the National Assembly Standing Committee were not unanimously approved due to concerns that increasing taxes on these items this year would impact and increase inflation. Therefore, the National Assembly Standing Committee requested the Government to prepare more carefully to submit for consideration and decision at the next meeting.

At this discussion session, the National Assembly Standing Committee said that the Government's supplementary impact assessment report was more complete.

In addition to gasoline, this Resolution also adjusts taxes on items that affect the environment, such as coal, herbicides, termite pesticides, plastic bags, and restricted-use disinfectants...