Finance Ministry proposes environmental tax hike

The Ministry of Finance has proposed raising environmental protection taxes on oil and petroleum products from the current VND3,000 (US$13 cents) to the ceiling level of VND4,000 (US$17 cents) per litre beginning July 1, 2018.

finance ministry proposes environmental tax hike hinh 0

Accordingly, environmental protection taxes have been proposed to increase by VND500 per liter of diesel oil to VND2,000 and by VND1,100 per liter of other oil products to VND2,000.

Plastic bags are also expected to see higher environmental taxes, rising from the current VND30,000 to VND50,000 per kilo, if the proposal is approved.

Last year, the ministry sought opinions about a draft law on the environmental protection tax hike to the highest level of VND8,000 per litre. The proposal faced fierce opposition from both the public and economists.

In 2014, a similar hike was imposed, raising the taxes from VND1,000 to 3,000, which the ministry referred to as a good way to stabilise the State budget.

The ministry said that the tax hike was necessary because import taxes on oil and petroleum products are declining sharply.

It added that petroleum is used in products containing chemicals, causing negative effects upon the environment, even when not in use. The current import tax on petroleum products is 20%, and 7% on oil products, and the respective rates will be slashed to 10% and zero percent as part of Vietnam’s tax cut commitments.

With the tax cut, revenues from petrol imports have been continuously decreasing in the past few years, as importers were keen on markets with more preferential tariffs. In addition, retail prices of oil and petroleum products in Vietnam are now lower than those in neighbouring countries and other Southeast Asian nations, the ministry noted.

According to the ranking of the Global Petrol Prices on November 27, 2017, Vietnam’s petrol retail selling price took 45th position among 167 countries and territories.  

The ministry said the environmental protection tax increase is in line with regulations under the Law on Environmental Protection Tax, adding that the hike would have effects on selling prices of other products. However, it would encourage savings of energies and natural resources, as well as consumption of environmentally friendly products, such as E5 bio-fuel. This could help Vietnam reduce emissions, contributing to implementation of its international commitments on environmental protection.

In January, Vietnam imported 900,000 tonnes of various kinds of oil and petroleum products, totaling US$552 million, marking respective rises of 3.5% and 10.8%, according to the General Statistics Office.

The current law on environmental protection taxes, issued in 2012, stipulates that products such as oil, gas, grease, coal, and plastic bags are subject to these types of taxes.

VNA

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