MOF plans to raise environmental tax on petrol products

The proposal to amend the Environmental Protection Tax Law has faced strong opposition over the last two years when the draft law was opened for public opinion. 

Because the amendment of the law to expand the tax frame has been delayed, MOF immediately proposed raising the environmental tax rate to the ceiling level, even though the amended environment tax law will be open for discussion again in 2019.

MOF said 40 ministries and branches agree with the draft resolution on changing the environmental protection tax rates.

MOF will raise the environmental protection tax rate on petrol from VND3,000 per liter to VND4,000, and on oil & lubricant from VND900 to VND2,000. 

The tax rate on air fuel, VND3,000 per liter, the highest rate in the tax framework, will remain unchanged.

As for kerosene, MOF has proposed to raise the tax rate from VND300 per liter to the highest rate designated in the tax framework at VND2,000, rejecting the opinion that it would be better to raise the rate only slightly to encourage production.

At present, E5 petrol is retailed at VND18,932 per liter. An analyst estimates that every  liter of petrol bears has many kinds of taxes and fees, totaling VND8,500. If the environmental tax rate increases by VND1,000, consumers will have to pay over VND9,000 to the state budget, or half of the petrol retail price, for every liter of petrol.

Tran The Truyen, CEO of Saigon Petro, warned that if the tax rates are raised as planned by MOF, the price will be only be a little higher than E5 petrol, about VND200 per liter. The modest gap will prompt people to turn their backs to bio-petrol. 

Truyen suggested applying a lower tax rate on E5 to help encourage the use of biofuel, stressing that most E5 users are low-income earners who need protection.

However, MOF doesn’t think this idea is reasonable. It has rejected the idea of applying preferential tax rates on petrol and oil products meeting Euro 4 and higher standards.

Ngo Tri Long, a pricing expert, commented that MOF’s arguments are unconvincing and that the ministry is just trying every possible way to raise tax to offset the decrease in tax collection caused by tariff cuts under foreign trade agreements (FTAs).

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M. Ha