Removing difficulties for the coal industry: Increasing exports instead of tax cutting
In the last period, the Ministry of Finance has received the recommendation document of Quang Ninh province and Vietnam National Coal – Mineral Industry Corporation (VINACOMIN) on removing difficulties for the coal industry.
In this regard, the Ministry of Finance has sent a response to the Ministry of Industry and Trade.
Regarding the proposed solution on reducing the minerals resource taxes for coal products, according to the Ministry of Finance, the current minerals resource tax for these products is 10-12% and is prescribed in Resolution No.1084/2015/UBTVQH13 dated December 10th, 2015 on the minerals resource tariff. This Resolution took effect from July 2016. Accordingly, the consideration of adjusting the minerals resource tariff is under the jurisdiction of the Standing Committee of the National Assembly.
According to the Ministry of Finance, the minerals resource tax rate stipulated in the above Resolution was issued in recent times, so it would take time to review and evaluate.
On the other hand, the proposal to adjust the rate of each tax, which is based on the recommendations of some units, needs to be considered carefully, especially in the context of the limited State budget.
The Ministry of Finance also had discussions with Vinacomin. This corporation said that the annual output of 3 mines: Vang Danh, Uong Bi, Nam Mau is 8.5 million tons of coal, including over 3 million tons of high quality coal (accounted for 35%) with low domestic demand.
Currently, the imported coal price is lower than the domestic coal price. Therefore, many power plants and cement factories have reduced purchases from Vinacomin, leading to an increase in the amount of coal inventory while coal exports planned in the period of 2017-2019 is only 2 million tons/year.
To remove difficulties in the short term for Vinacomin in the present context, the Ministry of Finance has proposed to the Ministry of Industry and Trade to adjust the coal export plan in the period of 2017-2020 from 2 million tons/year to 3-4 million tons/year.
“It is a solution having more practicability than the solution of reducing the tax rate because it will both reduce the amount of coal inventory with low domestic demand and not change the State budget revenues.”, stated the Dispatch of the Ministry of Finance.
According to Vinacomin, the output of raw coal of the corporation reached 26.7 million tons in 9 months, equivalent to 67% of the plan; the output of coal consumption was 25.7 million tons, equivalent to nearly 80% of the plan. However, the amount of coal inventory was at high level, 10.8 million tons; while the amount of clean coal to serve domestic consumers is low.
Coal exports also fell sharply compared to the same period last year. Specifically, exports of coal in the first 9 months of 2016 only reached over 730,000 tons, grossed $US 73.8 million, decreased by 48% in volume and 51% in value compared to the same period of last year.
On the other hand, coal imports rose strongly. According to the information provided by Mr. Nguyen Khac Tho, the Deputy General Director of the General Directorate of Energy (the Ministry of Industry and Trade) at the seminar on October 24th, in the last 9 months, Vietnam imported over 10 million tons of coal, increased by 147% compared to the same period of last year.
The reason is that the domestic coal resource does not meet the requirement and the imported coal price is lower than the domestic coal price. Specifically, more and more difficult exploiting conditions lead to the difference between the domestic and imported coal price. Many current mines and pits have to be drilled to the depth of more than 300 meters to be possible for mining. Meanwhile, the coal tax rate of Vietnam is higher by 5% to 7% compared to many countries in the area.
Not to mention that the coal price in the world has dropped sharply following the oil price in the first months of the year, making the gap between the domestic and international price.
In the above context, according to Vinacomin, the taxes and fees in the cost of coal mining has continued to rise in recent years. Minerals resource tax alone of Vietnam is higher by 7% to 10% than other countries in the region, while the coal export taxes of many countries are 0%, the import tax of Vietnam is 0%.
Therefore, the escalating of the amount of coal imported to Vietnam has put pressure on the domestic coal market, forcing Vinacomin to reduce production, impacting on jobs for workers.
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