Need alternatives for weighted average unit cost of gasoline tax

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Vietnam is participating in 11 FTAs, which varies the import tariffs. Photo H.Van.

As Customs Newspaper reported, at the end of March 2016, in order to reduce the difference between the Most Favoured Nation (MFN) tariffs and the preferential import tariffs of free trade agreements (FTAs), the Ministry of Finance has decided to use weighted average unit cost of gasoline tax to calculate the retail price of gasoline.

According to the Ministry of Finance, the use of weighted average unit cost of gasoline tax would ensure reality of imports from various sources of gasoline enterprises, national energy security and protect the interests of consumers, businesses and the State.

However, many experts argued that the application of the weighted average unit cost of gasoline tax was outdated and could not keep pace with changes in the world price.

At the press conference of the Ministry of Finance in the first 6 months of 2016, Deputy Minister Vu Thi Mai said: “This is the most logical way at the moment”.

Deputy Minister analysed: The formula of gasoline pricing in Decree No. 83/2014 / ND-CP of the Government on gasoline business has defined 3 duty levels including: preferential import tax under MFN, special preferential  import tax under FTAs and normal import tax applicable to countries with no commitment.

Thus, applying the weighted average unit cost of gasoline tax is completely suitable with the provisions of Decree No. 83.

Analyzing more details, representatives of the Ministry of Finance said: Currently, Vietnam participated in 11 FTAs, which varies the import tax. Even that we take a certain amount of these commitments or the MFN rate of taxation wouldn’t be justified.

Specifically, preferential import tariffs under the MFN are highest, while preferential import tariffs under the FTAs are lower. For example, for gasoline, MFN tariff of 20%, but the tax under the FTA with South Korea is only 10%; or MFN diesel tariff of 7% MFN, but the tax in ASEAN is only 4%.

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In fact, the Ministry of Finance also had a long discussion and proposed alternatives to the Prime Minister to apply under this plan. However, in the current context, the application of weighted average unit cost of gasoline tax is the most acceptable way.