Should soon reduce fuel tax

5 min read

When not paying gasoline to the market, while the world gasoline price is constantly rising and other price stabilization tools have run out of room, tax reduction is a necessary option to “reduce fever” of gasoline prices. On the other hand, because the price of gasoline is bearing a great burden from a series of costs such as taxes, fees, rated profits … Tax cuts should also be considered even if the price of gasoline on the world market does not rise.

The lower the price, the higher the tax

According to the reporter’s research, the gasoline price structure includes: taxable CIF price (imported gasoline price includes transportation costs), import tax (10%), VAT (10%), special consumption tax special tax (10% and 8% respectively for RON95 and E5 gasoline), environmental protection tax (3,800 VND/liter for E5 gasoline and 4,000 VND/liter for RON95). And yet, each liter of gasoline still incurs the business norm of 1,050-1,250 VND, the profit is 300 VND and the setting up of the Petroleum Price Stabilization Fund (BOG) according to the actual management of the management agency.

In particular, the environmental protection tax is considered the heaviest tax on petroleum products. For example, with the price of RON95 gasoline at 24,996 VND/liter and E5RON95 at 23,669 VND/liter at the most recent operating period on November 10, the environmental protection tax is accounting for about 16% of the retail price of gasoline.

Notably, unlike taxes on CIF prices with the characteristic of increasing and decreasing according to price fluctuations in the market, environmental protection tax is a fixed amount, so the lower the price of gasoline, the higher the rate of this tax in the price structure. For example, when ron95 gasoline prices plummeted to more than VND12,000 per liter in March 2020, the environmental protection tax alone accounted for nearly a third of retail prices. At times, the proportion of this tax per liter of gasoline is recorded even higher.

Also in March 2020, according to calculations by the Ministry of Industry and Trade, the proportion of taxes and fees in gasoline prices was up to 55%-60%, in oil prices it was 35%-40%. In which, the environmental protection tax alone accounts for 32% of the gasoline price, 11%-20% of the oil price. Therefore, the Ministry of Industry and Trade proposed the Government to consider and direct the Ministry of Finance to study and submit a plan to reduce environmental protection tax for petroleum products at an appropriate level.

In particular, it is proposed to further reduce the environmental protection tax on E5 gasoline to match its meaning in contributing to reducing environmental pollution and creating a clear price difference to encourage use. However, up to now, this tax has remained unchanged according to the framework specified in the Law on Environmental Protection Tax, which took effect from January 1, 2012 and is specified by the National Assembly Standing Committee.

Can’t wait

Economic experts expressed their agreement with the tax on environmental protection on polluting items and assessed that this is a meaningful source of revenue to supplement spending for the environment. However, the environmental protection tax rate for petroleum products needs to be considered and adjusted appropriately to avoid overlapping and contribute to sharing the difficulties of people and businesses in the context of the situation. The Covid-19 pandemic has had a severe impact.

“The current tax rate for each liter of gasoline is too high!” – Economic expert Pham Chi Lan is angry. According to Ms. Chi Lan, taxes and fees sometimes account for more than 60% of the gasoline price structure, especially the environmental protection tax is sometimes 40% of the gasoline price, which is very unreasonable. In particular, in the context that enterprises are trying to restore production and business, it is not “reasonable” to have to pay for taxes and fees in petrol prices.

“The Government and the National Assembly discussed and approved many policies to support people and businesses to recover from a long period of “freezing” activities because of the epidemic, including exemption, reduction and extension of many taxes. However, taxes and fees in the important input fuel of enterprises are petroleum is not reduced, it does not support the best for enterprises. Other tax reductions may not offset the increased costs due to the sharp increase in gasoline prices at the right time when enterprises return to the market and have production needs, ship… “It’s huge,” Ms. Pham Chi Lan pointed out.

Also according to expert Pham Chi Lan, the environmental protection tax on gasoline should be considered for the most reduction because this tax is at an absurdly high level, the framework prescribed in the law. In particular, the environmental protection tax is collected at a high rate, but people do not know how to use it specifically. Therefore, Ms. Lan emphasized that in addition to tax reduction, it is necessary to be more open and transparent in use.

Rising gasoline prices are also an important factor threatening inflation in the near future. Dr. Tran Toan Thang, Head of The Department of Economic Forecasting of industry and enterprises of the National Center for Socio-Economic Information and Forecasting (NCIF, Ministry of Planning and Investment), said that NCIF forecasts petroleum and metal items… will set a higher price level after the Covid-19 pandemic. This can put upward pressure on inflation due to increased costs from outside, especially import costs.

“There have been many discussions about whether to stop collecting environmental protection tax in petrol or not because this cost is at a relatively high level. If this tax can be reduced, it will contribute to reducing gasoline prices, helping control control or at least stabilize inflation” – Mr. Thang acknowledged.

A representative of the Vietnam Petroleum Association admitted that there is currently no room to reduce gasoline prices through the BOG Fund, but there is still room to reduce environmental protection tax and special consumption tax. Therefore, this tool can be considered to cool down domestic gasoline prices.

Considering reducing fuel tax

Talking to the press recently, a representative of the Ministry of Finance said that he had received a proposal from the Ministry of Industry and Trade to review to reduce taxes currently applied to gasoline. Currently, the Ministry of Finance is considering this proposal before reporting it to the competent authorities.

Previously, regarding the increase in gasoline prices in recent years, representatives of the Ministry of Finance said that the competent agencies, including the Ministry of Finance, will closely follow the developments, calculations and policy recommendations to the competent authorities to minimize the negative impact on the economic recovery process as well as people’s lives.


Efforts to keep commodity prices

At a regular press conference on covid-19 prevention in Ho Chi Minh City on November 22, Mr. Le Huynh Minh Tu, Deputy Director of the Department of Industry and Trade, said that food and food items are increasing prices in line with the increase in the price of raw materials, fuel and the cost of epidemic prevention of enterprises. “To meet the market demand, Price stabilization enterprises still play a key role in regulating prices to ensure the price of goods as every year” – Mr. Le Huynh Minh Tu said.


Phuong Nhung

Source: – Translated by