Despite a public uproar, the Ministry of Finance has shown no signs of backing off its plan to hike the environmental protection tax on fuels by VND3,000-8,000 a liter, double or triple the current level.

A vehicle is refilled at a gas station in HCMC. Despite a public uproar, the Ministry of Finance has shown no signs of backing off its plan to hike the environmental protection tax on fuels

The planned tax hike is considered based on multiple factors, the ministry said in a report on input it has got from ministries, local authorities, organizations and individuals for the draft Law on Environmental Protection Tax.

The tax hike is inevitable as Vietnam is gradually cutting import tariffs in line with international commitments, the ministry said in the report published on its website last Friday. The rising consumption of fossil fuels is impacting on the environment, so new policy initiatives are needed to shift to renewable energy.

Fuel prices and environmental taxes on fuels in Vietnam are lower than other countries. Therefore, a tax spike will help the country respond to global economic volatility effectively, especially oil price changes.

According to the ministry, the new tax bracket will be applied for a long term. After the tax is increased, the ministry will assess its impact on the economy, enterprises, fuel retailers and the republic, and ensure to maintain the competiveness of domestic firms.

The ministry received numerous suggestions from other ministries, agencies, individuals and organizations that a specific roadmap for the tax be included in the draft to prevent any ad hoc policy changes.

Some said the draft law suggests that the tax in Vietnam is low, but the ministry did not elaborate on tax rates in other countries.

Others proposed raising the tax by the maximum level in the current tax bracket, or 1.5 times higher than the current highest rate (from VND4,000 to VND6,000 per liter) or the upper limit for gasoline, at VND5,000 per liter, because fuels are an essential item for production, transport and the public.

After the ministry suggested lifting the tax on fuels from the current range of VND1,000-4,000 to VND3,000-8,000 per liter early this year, economists, lawyers and consumers strongly objected to the proposal. Most said the use of environmental tax revenue is not transparent as the environment is worsening despite the tax. The ministry then failed to explain how environment tax revenue is used.

The ministry resubmitted the plan in late May. In a draft submitted to the Government, the ministry said VND26.3 trillion had been used for environmental protection in 2012-2016, taking to VND131.8 trillion the total spending on the environment.

The amount was spent on many projects, including regular spending on environment protection, survey, land and mineral assessment, protection of water resources, seas and islands, and even elevated railways and green programs.

The draft is expected to go before the fifth session of the 14th National Assembly.

SGT