Why does the Ministry of Finance propose increasing the environmental tax on gasoline?

The lower gasoline price in our country is one of the reasons for raising taxes. Photo: Hong Van.

Proposal to increase tariffs on 11 items

According to the draft, 11 items of four groups are included in the list of tax increases. Specifically, from 1st July 2018, the environmental protection tax rate for petroleum products is proposed to increase to the top of the regulatory framework of the law.

Gasoline with the tax bracket of 1,000-4,000 VND/liter is recommended to increase from 3,000 VND/liter to 4,000 VND/liter. Diesel which has the tax bracket of 500-2,000 VND/liter, is proposed to increase from 1,500 VND/liter to 2,000 VND/liter; Mazut and lubricant with the tax bracket from 300-2000 VND/liter, is proposed to increase from 900 VND/liter to 2,000 VND/liter. Grease has a tax bracket of 300-2000 VND/kg. The current tax rate is 900 VND/kg. Grease is suggested to increase from 900 VND/kg to 2,000 VND/kg (the ceiling price). All the levels after increasing are the ceiling price.

The Ministry of Finance also proposed increasing the environmental protection tax rate for plastic to 50,000 VND/kg instead of 40,000 VND/kg now. The environmental protection tax on coal is also increased since it causes serious environmental pollutants when using. Tariffs for anthracite coal are expected to increase from 20,000 VND/ton to 30,000 VND/ton; brown coal, charcoal, coal will increase from 10,000 VND/ton to 15,000 VND/ton. And HCFC will be increased to 5,000 VND/kg.

Many reasons for raising taxes

Regarding the proposal of increasing tax for petroleum - a sensitive item, the Ministry of Finance said that the strong reduction of import tax on gasoline from other countries has affected the budget revenue, especially the petroleum imported from China and Korea (petroleum imported from ASEAN and China market accounts for over 60%).

Ministry of Finance also stated that due to the implementation of tariff reduction under the free trade agreement, the revenue from petroleum import activities continuously decreased over the years. Specifically: revenue from ASEAN in 2016 is 5.8 trillion VND, down 57% compared to 2015 (13.5 trillion VND); revenue from China is 898 billion, down 76% compared to 2015 (3.712 billion). In 2017, revenues of petroleum import from these markets continued to decline, in which from ASEAN falling by 97% compared to 2016.

Moreover, according to the Ministry of Finance, the current retail price of petroleum in Vietnam is lower than that of other countries sharing borders in particular, and many other countries in ASEAN and Asia in general.

According to the ranking of the Global Petrol Prices website on 27/11/2017, Vietnam's retail petrol price ranked 45th from low to high among 167 countries (lower than 122 countries) at the price of VND 18,580 / liter, lower than the three countries sharing the border with Vietnam (lower than Laos 5,304 VND / liter, Cambodia 2988 VND / liter, China 1650 VND / liter); and lower than some other countries in ASEAN, Asia (such as lower than Singapore 18,560 VND/liter, Philippines 3,892 VND/liter, Hong Kong 27.974 VND/liter).

The Ministry of Finance also stated that petroleum products contain many pollutants such as lead, sulfur, benzene, aromatic hydrocarbons, heavy hydrocarbons and some additives. These are harmful substances for health and environment. In particular, working with benzene for a certain time causes risk for cancer.

Therefore, the adjustment of the environmental protection tax rate for petrol and oil is necessary in order to further raise the responsibility and awareness of organizations and individuals towards the environment, encourage the production and use of alternative environmentally-friendly products (like bio-fuel).