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Petrol tax cuts: people await good news

The Ministry of Finance (MOF) has finally proposed a cut in luxury tax and VAT after advising that the environmental protection tax be cut to the floor level, to be applied from early August to the end of the year.

The detailed tax cut scenario has not been disclosed and still needs the National Assembly’s approval. However, the effort of the ministry which handles the finances of the country is compared with a ‘fresh breeze’ in the current scorching hot atmosphere caused by the continuous petrol price increase.

The tax cut was kicked off by Minister of Finance Ho Duc Phoc at the latest National Assembly (NA) session.

“We once intended to ask the government to propose to the NA that NA authorize its Standing Committee to make decisions on petrol taxes, because the NA only convenes session once every six months. However, after referring to the Constitution, we found that the provisions about tax obligations must be implemented in accordance with the laws. Only when the NA agrees will we have a reason to submit a tax cut plan,” Phoc said before the NA.

However, NA Chair Vuong Dinh Hue said the tax issues, whether they are within the jurisdiction of ministries, Government, NA and NA Standing Committee all come from the proposal by ministries as state management agencies. 

“Voters and people all over the country are looking forward to the policy response. Please show your views and principles as a Minister,” Hue said.

The pressure of the NA Chair on the basis of legislative principle has obviously brought effects and MOF has taken the initiative in suggesting tax cuts as mentioned.

The Government, in its report to the NA about its view in petrol price regulation, said that ‘it is necessary to use the tools of tax and fee to stabilize domestic petroleum prices’ in the time to come, if the petrol prices are overly high, which affects l economic development and people’s lives, and neutralizes policies serving economic recovery.

The Government can see the adverse effects of the high petrol prices on inflation and macroeconomic stability. Therefore, the Government has committed to regulate petrol prices flexibly and ensure supply.

Emergencies need urgent solutions

Stabilizing the macro-economy and curbing inflation are important achievements Vietnam gained over many years thanks to the efforts to manage monetary and fiscal policies in harmony.

The current high petrol prices are threatening these achievements; so, reducing taxes to help people and businesses overcome difficulties and curb inflation needs to be a top priority. 

Some experts propose the sharpest possible cuts on luxury taxes on petrol, saying that petrol is a kind of essential good that serves production and people’s lives, and therefore, should not be subject to luxury tax.

Some days ago, MOF insisted on the imposition of luxury tax on petroleum products. It cited statistics to prove that the luxury tax rate in Vietnam is still lower than that in many other countries. VND6.503 trillion worth of tax was collected in the first five months of the year.

At that moment, MOF also affirmed that the adjustment of luxury tax is under the authority of the NA which means that it is necessary to get approval from NA on tax cuts. In general, tax adjustments won’t be applied immediately. Meanwhile, petrol prices fluctuate daily.

Therefore, MOF said, luxury tax cuts should not be considered for the immediate time.

However, MOF has changed its view and submitted to the Prime Minister a plan on cutting the luxury tax and VAT.

Lowering taxes and fees on petrol products is an urgent need and necessary to be done immediately. Emergencies need commensurate urgent policies.

The Vietnam Confederation of Commerce and Industry (VCCI) once expressed its worry that the tax cut would be delayed if following current procedures.

“The nearest NA session will only be convened this year end. Therefore, this may affect the implementation of the tasks of controlling inflation and stabilizing macro economy.

Nguyen Dinh Cung, former Director of the Central Institute of Economic Management (CIEM), hopes that tax cuts would be implemented immediately.

He said the Government needs to consider tax cut levels and submit to the NA soon. The NA can convene an extraordinary meeting to consider the issue like the one organized in January.

According to the General Department of Taxation (GDT), the state budget collections in H1 reached VND775.262 trillion, or 66 percent of estimates. The figure once again shows that tax exemption has not affected budget collection.

Lan Anh


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