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Government may withdraw environmental tax hike proposal

The Government is considering withdrawing a proposal from the Ministry of Finance (MoF) to increase environmental taxes on fuel products to the maximum of 8,000 VND (0.35 USD), stating the move requires further consideration.

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government may withdraw environmental tax hike proposal hinh 0
Each litre of petrol cost an extra 1,000 VND due to the hike of environmental tax. (Photo: xangdau.net)

The ministry has proposed several times almost tripling the environmental protection tax on oil and gas consumption to the maximum 8,000 VND per litre, including in the draft revised Law on Environmental Protection Tax. 

The environmental protection tax on petroleum products was last increased on January 1, 2019, according to a resolution issued by the National Assembly Standing Committee on October 20, 2018.

Under the resolution, the tax on gasoline was increased by 1,000 VND to 4,000 VND per litre instead of 8,000 VND per litre as proposed by the MoF. 

Kerosene was subject to an environmental tax of 1,000 VND per litre, 700 VND higher than the current level.

In addition, taxes on lubricants and mazut were also raised to 2,000 VND per litre from the previous level of 900 VND.

The bio-fuel E5 RON 92 is selling at 16,272 VND per litre, while that of RON 95-III is 17,603 VND per litre. Each of petrol litre was added 1,000 VND due to the hike of environmental tax. 

The Government has submitted a report to the National Assembly on law making this year and next, including the draft revised Law on Environmental Protection Tax which has only focused on petrol. 

The Government said it would need more time to study the draft, especially the issue of expanding taxable subjects with adverse impacts on the environment.

The resolution proposed increasing environmental tax on gasoline, kerosene, diesel, mazut, aviation fuel and plastic bags to the highest level. Some products such as coal, herbicides, pesticides, forest preservatives and warehouse disinfectants were not raised to the maximum tax level.

The drastic change would affect businesses’ production and competitiveness, prompting the Government to call for more time to consider the decree.

The MoF’s proposal raised concerns from experts and citizens. Many experts pointed out that raising environmental protection tax not only goes against stimulus measures but also creates inequality for low and middle income people and reduces domestic consumption.

Dang Thi Thu Hoai, Secretary of the Prime Minister’s Economic Advisory Group, warned the increase could affect businesses’ production costs and competitiveness.

She also said all people need petrol, including the poor, so the tax hike could affect income distribution.

Developed countries which have better social welfare systems have the conditions to apply such taxes, and while Vietnam can learn from such nations, the country must live in reality, she added.

Nguyen Thi Tue Anh, Deputy Director of the Central Institute for Economic Management said tax is only one tool to encourage green growth and sustainable development and other policies should be considered, such as green credit.

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