Petrol tax reduction could benefit economic development: experts

Without taxes and fees, the average petrol price in Việt Nam would be about VNĐ20,000 per litre. Photo kinhtedothi.vn

HÀ NỘI — Việt Nam needs to reduce taxes and fees for petrol and oil products to stabilise the domestic petroleum market and ensure economic growth, according to experts.

Now, the average price of petrol, one of the economic inputs, has increased by 27.26 per cent from the beginning of the year and nearly 50 per cent on-year in the domestic market. Gas prices have also increased by almost 27 per cent from the beginning of the year.

The Ministry of Industry and Trade and the Ministry of Finance had a decision to increase by VNĐ602 per litre to VNĐ30,235 for E5-RON92 petrol and VNĐ921 per litre to VNĐ31,578 for RON95 petrol from June 1. 

This record high price puts great pressure on the economy and has negative impacts on people’s lives and the production and business of enterprises.

A representative of the Department of Domestic Market under the Ministry of Industry and Trade told VTC News that in the structure of petrol price in Việt Nam at present, taxes and fees account for about 30-32 per cent, equivalent to VNĐ10,000 – 11,000 per litre of petrol.

Thus, the average petrol price in Việt Nam would be about VNĐ20,000 per litre without taxes and fees.

According to the Ministry of Finance, Việt Nam now imposes import, special consumption, environmental protection, and VAT on petrol and gas products. These taxes are common practices throughout the world.

Deputy Minister of Finance Tạ Anh Tuấn said that after recent adjustments, taxes currently account for 29-31 per cent of petrol prices and 13.3 per cent of diesel oil prices, which are at low levels compared to the world average of about 45-60 per cent, excepting countries with large oil reserves.

Following the NA’s adoption of a resolution on cutting 50-70 per cent in the environmental protection tax rate on gasoline, oil, and grease, the Finance Ministry has submitted to the Government a proposal on reducing the preferential import tax (MFN) for unleaded petrol from 20 per cent to 12 per cent to help reduce the cost of importing gasoline and diversify import sources.

Chairman of the Việt Nam Petroleum Association Bùi Ngọc Bảo said the reduction of MFN tax from 20 per cent to 12 per cent was not attractive for petroleum businesses to seek new markets.

If the MFN tax rate is reduced to 12 per cent, the difference of 4 per cent between the MFN tax rate and the tax rate on gasoline under the free trade agreement (FTA) is huge. Therefore, they will still prioritise imports from markets such as South Korea and ASEAN with the FTA tax rate of 8 per cent.

Bảo said the MFN tax must be reduced to 8 per cent, equal to the FTA tax rate. With the tax rate, petroleum companies would be interested in diversifying supply.

Meanwhile, according to Trần Hoàng Ngân, a member of the National Assembly, the environmental protection tax has been reduced by 50 per cent, so there is still another 50 per cent that can be used if the oil price continues rising. In addition, the special consumption tax of 10 per cent for gasoline has not yet been considered to cut.

“Now, petrol is no longer a special commodity but essential. There’s no reason Việt Nam needs to levy the special consumption tax on gasoline. Thailand, South Korea, Poland, India and many others have reduced this tax,” Ngân said.

He has also said that it is possible to consider reducing value-added tax and import tax for gasoline products.

Tax is important revenue for the national budget, including a large amount from taxes for gasoline, so reducing those taxes can affect the budget. However, petroleum is an input material for many economic sectors. If gasoline prices rise too high, it will increase prices for many other commodities, causing inflation.

Ngân said that it was acceptable for a shortfall in budget revenue from the tax reduction for gasoline to support input costs for businesses, stabilise the macro-economy, and help people overcome difficulties. Meanwhile, if the tax was reduced, it would reduce inflation and budget expenditure, and nurture the collection sources, create the sustainability of the state budget revenue.

Regarding the petrol price hike recently, Deputy Minister of Industry and Trade Đỗ Thắng Hải said at a regular Government press conference on June 4 that the ministry was working hard to ensure petrol supply sources for daily life and production activities and coordinating closely with the Ministry of Finance in managing petrol and oil prices.

From the beginning of the year to June 1, the average price of some petroleum products on the Singapore market increased by 45.86-63.68 per cent.

The ministry would coordinate with other ministries and sectors to review taxes and consider reducing taxes relating to the petrol price structure within the allowable range, Hải said.

Besides the proposal for deeper tax reduction, experts and members of the National Assembly said that tax reduction must be implemented immediately. Many businesses said that the higher price of gasoline forced them to increase their product and service prices, especially transportation companies. —VNS