VietNamNet Bridge – Petrol distributors have raised the petrol prices five times this year. Vietnamese now have to pay VND4,000 higher for every liter of petrol than consumers in the US.

On July 8, one day after announcing the fifth petrol price increase, the Ministry of Finance for the first time in many years made public the formula of calculating petrol prices.

Vietnam has to import 60-70 percent of the petroleum products it needs for domestic consumption.

Vietnam exploits 15 million tons of crude oil a year, but only 6 million tons of the crude oil is refined at the Dung Quat Oil Refinery, while the other 9 million tons are exported.

It has to import finished products because of the limited capacity of the Dung Quat Refinery.

Every liter of petrol bears the import tariff of 18 percent, luxury tax of 10 percent, environmental protection tax of VND1,000 and the value added tax of 10 percent, or VND8,244 in total.

As such, the petrol price in Vietnam is high because it bears heavy taxes of VND8,244 per liter.

Nguyen Minh Thuy from the Economics & Finance Institute confirmed that high tax rates are the reason why petrol in Vietnam is more expensive than in the US.

Thuy believes that the state needs to cut taxes to force petrol prices down because the currently applied measures to stabilize the market are not enough to curb price increases.

“The state can change policies at certain moments. I am sure that when it reduces tax, the petrol prices will go down,” Thuy said. “In 2009-2010, when the state took drastic measures to stabilize the market, the prices were at very low levels”.

Meanwhile, Dr. Nguyen Dinh Chien from the Finance Academy said he does not think the taxes are overly high.

He stressed that the 10 percent luxury tax, VND1,000 per liter environmental protection tax and 10 percent VAT are “unchangeable”, and “not high if compared with other countries”.

However, Chien admitted that the import tax changes regularly and agreed that it is necessary to cut taxes at this moment when both people and enterprises are facing big difficulties in the economic recession.

“I think the import tariff needs to be cut down to help enterprises and people,” he said, adding that petrol pricing affects the prices of other products.

When asked why the Ministry of Finance does not think of cutting tax to force the petrol price down, Nguyen Anh Tuan, head of the ministry’s Price Control Agency, said taxes are a very important source of revenue for the state’s coffers, so the ministry always needs to seriously consider the issue before making any decisions.

The petrol price has increased five times this year by VND1,440 per liter. The price increased by VND410 per liter on July 7. The continued petrol price increase is believed to lead to price increases of many other goods and services.

Dat Viet