Tax reductions to control petroleum price are not an effective solution

VCN - According to As. Prof. Dr. Dinh Trong Thinh, Senior Lecturer of the Academy of Finance, with current increases in petroleum prices, tax reduction is not the effective solution because it affects the State budget and does not met requirement of environmental protection and emission reduction.
Credit institutions must declare and pay taxes before collateral settlement Credit institutions must declare and pay taxes before collateral settlement
Tax sector collects VND672.878 billion Tax sector collects VND672.878 billion
Tax payable increases by more than VND1,400 billion after re-valuation of cars as gifts Tax payable increases by more than VND1,400 billion after re-valuation of cars as gifts
Tax reductions to control petroleum price are not an effective solution
As.Prof. Dr. Dinh Trong Thinh, Senior Lecturer of the Academy of Finance

Facing the pressure of world petroleum prices, domestic petroleum prices have been revised up above VND 30,000 per liter. What is your opinion on prices at the moment?

Petroleum products are a special commodity and a a basic material of the economy, so the price management has a great impact. However, currently, domestic petroleum prices are being affected by the fluctuation of the world price. Vietnam applied the market economy so it must comply with the market economy rules; the price is revised up and down according to the fluctuation of market. That's the principle. And when we accept following the market economy, the price must be complied with the law of supply and demand, especially the price of petroleum due to the big influence of world prices.

The inter-Ministry of Industry, Trade and Finance has managed petroleum prices quite flexibly and effectively, met the requirements of the National Assembly and the Government on economic recovery and growth, helping keep the consumer price index in the first months of 2022 at a reasonable level.

The inter-Ministry has also taken measures, such as; using the stabilization fund, reducing environmental protection tax to help businesses achieve recovery and growth.

The surge in the price of petroleum has had impacted on the prices of many industries and commodities. In particular, there are items that are not affected much but also increase in price. Do you have any comments on this?

Currently, many items in the economy are not much affected by petroleum prices, but their prices also go up. For example, the price of vegetables, tubers, pork and chicken is not affected by petroleum price but also increase several tens of percent. This is an unusual sign. Now, the most affected sector is transportation.

To stabilize market prices, in my opinion, state agencies have to calculate the composition of products. Only when the state agency knows the exact price, they can control selling price of the businesses, restrain the price from increasing uncontrollably as it has been happening for a long time. For example, petroleum accounts for 40% of the value of transport cars. If it increases by 10%, the price of transportation must increase by 4%. For production and business operators, if the prices increase by 10%, the possibility of price increase is only 2-3%, cannot surge to 20%.

Facing the increase in petroleum price and the demand to support people and businesses against the impacts of the Covid-19 pandemic, there have been proposals on tax exemptions and reductions for this item to reduce the price. How do you assess these proposals?

Currently, taxes applied to petroleum products, including import tax (for imported petroleum products), value-added tax, excise tax (for gasoline) and environmental protection tax (no charge or fee for petrol and oil), ensuring compliance with international practices as well as Vietnam's practice.

Compared with many countries in the world, Vietnam’s proportion of tax in selling price is still lower than the general average. The tax proportion in the selling price of petroleum product in many countries is about 45%-60% (except for some countries with large oil reserves, the proportion is lower). Meanwhile, the proportion in Vietnam for gasoline and oil is about 38% and 20%, respectively.

Therefore, tax reduction on petroleum will create a price gap with bordering countries and cause smuggling and tax evasion by petroleum traders, causing damage to the State budget. Besides, a reduction on petroleum products will discourage businesses in the economy from saving energy in and petroleum product.

Furthermore, tax for petroleum product is Government long-term policy to ensure the State revenue and satisfy the requirements of environmental protection, reduce emissions, ensure reasonable and economical use of non-renewable resources and regulate income in the economy.

In my opinion, the tax reduction is not recommended because it may bring more problems than it solves. If the tax is lowered, there will be risks of affecting the State budget. We must also realise that tax reductions are not generally intended or targeted support measures. If tax reduction is targeted, the State must intentionally clarify particular objects to support, where the support will create economy strength. If supporting production, the State needs to pay attention to the price of oil, not the price of gasoline.

I suggest the solution at this time is that the higher the price of petrol, the more effectively it must be used, so the State needs to find a solution to encourage people and economic sectors to use the products economically. For production and businesses, they must consider how to minimize transportation costs and plan production to save petroleum. In the long term, it is necessary to change the use of petroleum to other source of energy.

By Thuy Linh/Ngoc Loan

Related News

Bulgaria Announces Merger of Customs and Revenue Agencies

Bulgaria Announces Merger of Customs and Revenue Agencies

The Bulgarian Ministry of Finance has unveiled plans to consolidate the National Revenue Agency and the Customs Agency into a single entity, marking a significant step towards streamlining financial operations in the country.
Urgently revising Decree 123 to create maximum convenience for taxpayers

Urgently revising Decree 123 to create maximum convenience for taxpayers

VCN - Faced with the urgent requirement of drafting a Decree amending and supplementing Decree 123 to soon submit it to competent authorities for approval, the General Department of Taxation is actively reviewing the draft Decree amending and supplementing the Decree. 123/2020/ND-CP (Decree 123) of the Government on invoices and documents to create maximum convenience for taxpayers as well as the general development of the country's economy.
Proactively responding, carbon tax policy creates motivation for green transformation

Proactively responding, carbon tax policy creates motivation for green transformation

VCN - According to experts, the measure of carbon tax on imported goods in Vietnam's major export markets is a short-term challenge but will create more innovation for Vietnam to realize its Zero net emissions target.
The Taxation continues to digitally transform comprehensively

The Taxation continues to digitally transform comprehensively

VCN - In 2023, digital transformation is one of the 10 outstanding highlights of the Taxation. With the motto of taking people and businesses as the center to serve, the Taxation has been implementing many projects and tasks to apply information technology in tax management and comprehensive digital transformation.

Latest News

Vietnam acts to combat money laundering, terrorist financing

Vietnam acts to combat money laundering, terrorist financing

Deputy Prime Minister Le Minh Khai on February 23 signed a decision promulgating the national action plan to implement the Government's commitment to prevent and combat money laundering, terrorist financing, and financing of the proliferation of weapons of mass destruction.
Banks ask central bank to extend June 30 payment deadline

Banks ask central bank to extend June 30 payment deadline

Industry experts said the current challenging economic situation and difficulties faced by businesses severely affect their ability to meet debt obligations. As there are no shortcuts to resolving old bad debts, a significant number of newly classified bad debts, which should be expected on June 30 this year, will put tremendous pressure on the country’s financial sector, as well as businesses.
Efforts to remove obstacles to upgrade the stock market

Efforts to remove obstacles to upgrade the stock market

VCN - According to the sharing of Ms. Vu Thi Chan Phuong, Chairwoman of the State Securities Commission (SSC), in addition to completing the main criteria of international rating organizations in upgrading the stock market (TTCK), the State Securities Commission (SSC) continues to improve domestic regulations on the basis of researching international regulations and practices to promote Vietnam's stock market to develop in a sustainable direction, creating a favorable environment to attract international investors and foreign indirect investment capital flows.
The State Treasury implements nine key tasks in 2024

The State Treasury implements nine key tasks in 2024

VCN - The deployment of key tasks plan in 2024 (refer to the Plan) of State Treasury was issued to focus resources on completing tasks during the year and following the proposed strategies.

More News

SBV injects large amount of money to support capital for banks

SBV injects large amount of money to support capital for banks

The State Bank of Vietnam (SBV) on February 20 net injected more than 5 trillion VND (nearly 204 million USD) into the banking system through the open market operation (OMO) channel to support capital for commercial banks.
Vietnam Stock Exchange’s revenue down nearly 44% in 2023

Vietnam Stock Exchange’s revenue down nearly 44% in 2023

The Vietnam Stock Exchange (VNX) reported revenue of over 1.92 trillion VND (78.26 million USD) in 2023, down nearly 44% compared to the previous year.
Focusing on five tasks so that the securities industry continues to develop in the face of intertwined opportunities, challenges

Focusing on five tasks so that the securities industry continues to develop in the face of intertwined opportunities, challenges

VCN - Deputy Minister of Finance Nguyen Duc Chi raised five tasks that need to be focused in 2024 so that the securities industry continues to develop in the face of intertwined opportunities and challenges.
Prioritizing the allocation of public investment capital

Prioritizing the allocation of public investment capital

VCN - Public investment in 2024 continues to set a disbursement target of at least 95% of the total of more than VND657,000 billion of assigned public investment capital. Thus the task is to focus on allocating capital quickly and reasonably right from the beginning of the year.
6,144 retail petroleum stores issue invoices after each sale

6,144 retail petroleum stores issue invoices after each sale

VCN - According to the latest statistics of the General Department of Taxation, as of February 1, 2024, the country has 6,144 retail petroleum stores issuing electronic invoices after each sale.
PM Chính instructs action for stock market upgrade

PM Chính instructs action for stock market upgrade

Efforts have been made to attract investment and promote the image of the Vietnamese stock market, with the goal of upgrading it from frontier to emerging status.
Cai Mep – Thi Vai port gets very busy right from the beginning of Tet

Cai Mep – Thi Vai port gets very busy right from the beginning of Tet

VCN - Many mother vessels made landfall at Cai Mep – Thi Vai port (Ba Ria – Vung Tau province) in the early days of Dragon Year 2024 showing positive signs about the recovery of seaport activities.
Public offerings key to promoting corporate bond market: experts

Public offerings key to promoting corporate bond market: experts

To promote the professional corporate bond market, one solution is to focus on widespread public offerings of corporate bonds rather than private placements, said experts.
New policy may have adverse impacts on bancassurance

New policy may have adverse impacts on bancassurance

A new regulation on banning commercial banks from selling insurance together with banking services will negatively affect banks’ bancassurance revenue in the future, some analysts have claimed.
Read More

Your care

Latest Most read
Vietnam acts to combat money laundering, terrorist financing

Vietnam acts to combat money laundering, terrorist financing

Deputy Prime Minister Le Minh Khai on February 23 signed a decision promulgating the national action plan to implement the Government's commitment to prevent and combat money laundering, terrorist financing, and financing of the proliferation of weapons of mass destruction.
Banks ask central bank to extend June 30 payment deadline

Banks ask central bank to extend June 30 payment deadline

Industry experts said the current challenging economic situation and difficulties faced by businesses severely affect their ability to meet debt obligations. As there are no shortcuts to resolving old bad debts, a significant number of newly classified bad debts, which should be expected on June 30 this year, will put tremendous pressure on the country’s financial sector, as well as businesses.
Efforts to remove obstacles to upgrade the stock market

Efforts to remove obstacles to upgrade the stock market

VCN - According to the sharing of Ms. Vu Thi Chan Phuong, Chairwoman of the State Securities Commission (SSC), in addition to completing the main criteria of international rating organizations in upgrading the stock market (TTCK), the State Securities Com
The State Treasury implements nine key tasks in 2024

The State Treasury implements nine key tasks in 2024

The deployment of key tasks plan in 2024 (refer to the Plan) of State Treasury was issued to focus resources on completing tasks during the year and following the proposed strategies.
SBV injects large amount of money to support capital for banks

SBV injects large amount of money to support capital for banks

The State Bank of Vietnam (SBV) on February 20 net injected more than 5 trillion VND (nearly 204 million USD) into the banking system through the open market operation (OMO) channel to support capital for commercial banks.
Mobile Version