The Ministry of Finance has proposed, in a draft law, to almost triple the environmental protection tax on oil and gas consumption from the current VND3,000 (US$0.13) to VND8,000 per litre.

The draft will be submitted for approval to the Government in June and the National Assembly in October.

The new draft law proposes that E5 bio-fuel and E10 ethanol blend fuel be subject to environmental protection taxes of between VND2,700-7,200 and VND2,500-6.800 per litre, respectively, even though the products are considered cleaner and environmentally friendly than others.

In addition, the tax on aviation fuel was suggested to increase from the current VND1,000-3,000 to VND3,000-6,000 per litre.

The tax on diesel fuel is expected to increase from the current VND500-2,000 to VND1,500-4,000 per litre, while that of mazut would also go up to VND900-4,000 from VND300-2,000 per kilo.

Plastic bags are also expected to see higher environmental taxes, rising from VND30,000-50,000 to VND40,000-80,000 per kilo, if the draft is approved.

Earlier, Minister of Finance Do Hoang Anh Tuan acknowledged that the sector would continue promoting the collection of environmental protection taxes. This year, the ministry would expand the categories to be taxed.

Tuan said if the current environmental protection tax on petroleum was increased over the ceiling level, the value of collections would be 10 to 20 times higher than the direct collection from non-agricultural land use.

The ministry said the increased tax on some natural resources, and environmental protection on petroleum, had contributed to the domestic collection, thus easing difficulties for the State budget.

Experts believed that the proposed increase in the environmental protection tax would also raise gasoline prices in the country.

Economist Vo Tri Thanh said the Government should review the application of both special consumption taxes and environmental protection taxes, since the special consumption tax includes environmental fees.

Meanwhile, economist Nguyen Minh Phong said a hike in the environmental protection tax had been a method for increasing the State budget through petroleum prices. However, whether the tax was spent on environmental protection should be clarified, as there has been no specific report on the issue.

“The necessary issue is how to use the collection effectively, transparently and following the current laws,” Phong added.

In 2014, a similar hike was imposed, raising taxes from VND1,000 to VND3,000, which the ministry referred to as a good way to stabilise the national budget.

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

Statistics from the ministry also indicated that the environmental protection tax contributed between 1.5 and 4.1 per cent of the annual revenue of the national budget. 

VNS