The National Assembly Standing Committee resolved to reduce gasoline and oil taxes.

Reduce gasoline and oil tax by 700-2,000 VND/liter

According to Minister of Finance Ho Duc Phoc, the environmental protection tax rate on gasoline, oil, and grease from the effective date of the Resolution until December 31, 2022 is as follows:

Gasoline price decreased by 2,000 VND/liter, from 4,000 VND/liter to 2,000 VND/liter;

Diesel oil, fuel oil, and lubricants decreased by VND 1,000/liter, from VND 2,000/liter to VND 1,000/liter;

Grease reduced by 1,000 VND/kg, from 2,000 VND/kg to 1,000 VND/kg;

Kerosene decreased by 700 VND/liter, from 1,000 VND/liter to the floor price of 300 VND/liter;

Aviation fuel remains at the current reduced level of VND 1,500/liter according to Resolution No. 13/2021/UBTVQH15 dated December 31, 2021 of the Standing Committee of the National Assembly.

Environmental protection tax rates on gasoline, oil, and grease from January 1, 2023 will be implemented according to current regulations in Resolution No. 579/2018/UBTVQH14 of the Standing Committee of the National Assembly.

Meeting of the National Assembly Standing Committee on March 23. Photo: Quochoi.vn

International experience shows that, in the face of the recent continuous increase in world crude oil prices, in order to reduce the negative impact of high oil prices on inflation, consumption and people's lives, a number of countries have implemented solutions to reduce taxes on gasoline (depending on the characteristics, each country applies different tax reduction measures), in which Korea has temporarily reduced 20% of fuel tax on gasoline, diesel and liquefied petroleum gas for 6 months from November 12, 2021 to the end of April 2022.

ReduceTax on gasoline, oil, and grease directly contributes to reducing retail gasoline prices.

Minister of Finance Ho Duc Phoc said that with the expected consumption of gasoline, oil, and grease in 2022 being equivalent to the period before the COVID-19 pandemic, in 2019, at that time, with the proposed environmental protection tax rate on gasoline, oil, and grease, the expected environmental protection tax revenue for gasoline, oil, and grease will decrease by about VND 29,035 billion/year, thereby reducing the state budget revenue (including environmental protection tax, VAT) for the whole year by about VND 31,938 billion/year (the average monthly reduction in state budget revenue is VND 2,661.6 billion/month). If the environmental protection tax rate on gasoline, oil, and grease is reduced from April 1, 2022, the reduction in state budget revenue (including environmental protection tax, VAT) will be about VND 23,954 billion.

However, the fact that the world crude oil price and domestic gasoline price have continuously increased in recent times and are forecasted to continue to increase in the coming time will have an impact on increasing the state budget revenue, especially revenue from crude oil. Thereby, it will offset the decrease in revenue due to the reduction of environmental protection tax according to the above plan.

Illustration.

Impact on retail prices of gasoline, oil, and grease: Reducing the environmental protection tax on gasoline, oil, and grease as proposed will directly contribute to reducing retail prices of gasoline, oil, and grease (including VAT) by VND 2,200/liter for gasoline; VND 1,100/liter for diesel, fuel oil, and grease; VND 1,100/kg for grease; and VND 770/liter for kerosene.

Impact on CPI, inflation and economic growth, reducing environmental protection tax on gasoline, oil and grease will contribute to reducing selling prices, thereby limiting the increase in production costs, reducing product prices, stabilizing inflation, contributing to reducing the CPI index.

However, because environmental protection tax is an absolute number, CPI is a relative number, so the impact of reducing environmental protection tax on CPI gradually decreases when gasoline prices continue to increase compared to current levels; CPI will decrease by 0.61% if gasoline prices increase by 10% compared to current levels; CPI will decrease by 0.56% if gasoline prices increase by 20% compared to current levels; CPI will decrease by 0.52% if gasoline prices increase by 30% compared to current levels.

Sharing State benefits with people and businesses

Impact on people and businesses: Reducing environmental protection tax on gasoline, oil, and lubricants will contribute to sharing part of the State's benefits with people and businesses; contributing to reducing production costs for businesses and saving consumption costs for people.

Ensuring compliance with the principles of adjusting environmental protection tax rates, the reduction of environmental protection tax rates on gasoline, oil, and grease is consistent with the Party and State's policy of controlling inflation, stabilizing the macro-economy, and consistent with the country's socio-economic conditions in the context of world crude oil prices and domestic gasoline prices fluctuating and tending to increase while the socio-economy is facing many difficulties due to the impact of the COVID-19 pandemic.

At the same time, the adjustment ensures that it is within the framework of environmental protection tax rates prescribed in the Law on Environmental Protection Tax, so it still ensures the principle of being consistent with the level of negative environmental impact of the goods.

Minister Ho Duc Phoc speaks at the meeting of the National Assembly Standing Committee on the afternoon of March 23. Photo: VGP/Le Son

Concerns about falling gasoline and oil prices but not other commodity prices

In the short term, the consumption of gasoline, oil, and lubricants is unlikely to increase compared to the pre-pandemic period (2019) because the socio-economy still faces many potential risks due to the complicated epidemic situation. Therefore, basically, the reduction of environmental protection tax on gasoline in 2022 will not affect the environmental protection goal of the environmental protection tax policy because the increase in gasoline consumption will not be too large.

At the same time, the reduction of environmental protection tax on gasoline, oil, and grease does not violate international environmental commitments of which Vietnam is a member; does not increase greenhouse gas emissions and does not affect the progress of implementing the commitment to bring net emissions to "0" by 2050 because the implementation of the reduction of environmental protection tax on gasoline, oil, and grease is limited to December 31, 2022.

Speaking at the meeting, Chairman of the Economic Committee Vu Hong Thanh suggested that adjusting gasoline and oil prices should not only reduce environmental protection tax but also reduce other tax rates such as gasoline import and export tax, special consumption tax, etc.

National Assembly Chairman Vuong Dinh Hue said that gasoline is an essential commodity and is a price-stabilized commodity, closely following the world oil price situation but under the management of the State. The National Assembly Standing Committee basically agrees with the Government's proposal, but there are still many other opinions concerned that the world oil price will still fluctuate in the future. The price reduction depends on the Government's decision.

Speaking at the meeting, Deputy Minister of Industry and Trade Do Thang Hai said that domestic gasoline and oil prices must follow world gasoline and oil prices. People want gasoline prices to decrease and gasoline and oil prices to be transparent and public. The concern is that when gasoline and oil increase, other goods also increase according to gasoline and oil prices, but when gasoline and oil decrease, other goods do not decrease.

At the end of the session, the National Assembly Standing Committee voted to approve the draft Resolution on environmental protection tax (EPT) on gasoline, oil, and grease under conditions of maximum reduction as proposed by the Government.