After the environment protection tax was halved in early April, petrol bears a tax of VND2,000 per liter, while diesel, lubricant and mazut are VND1,000 per liter. The plan to cut the tax further was figured out at a time when petroleum prices have reached all-time high.

The tax and fee reductions for petroleum products were raised at the ongoing National Assembly session. Answering National Assembly deputies, Minister of Finance Ho Duc Phoc said he supported the tax and fee cuts.

“I think that petroleum is the product put under state control in pricing. Therefore, if the price reaches certain levels, the State would have to make intervention to force prices down,” Phoc said.

About the benefits expected from tax and fee reductions, Phoc said this would reduce production cost, promote growth, help improve the competitiveness and generate jobs.

Regarding the tax collection decreases because of the tax cut, Phoc said the State would be able to collect tax from the added value of the economy, VAT (value added tax) and corporate income tax (CIT) on other products to offset the decreases.

However, while believing that cutting taxes and fees is a good solution, Phoc said it is still necessary to consider possible impacts to decide how much to cut.

Prior to that, on the sidelines of the ongoing National Assembly’s session, Minister of Industry and Trade Nguyen Hong Dien mentioned the need of forcing petroleum prices down.

“In current conditions, in order to control petroleum prices, we need to use many different tools, including taxes and fees, and strengthen market control. If the prices continue rising, it will be necessary to use social welfare policy and give support to disadvantaged people,” Dien said.

As such, the views of the two ministers responsible for the petroleum prince stabilization are identical and compatible with the government’s socio-economic development report submitted to the National Assembly. 

The report says that petroleum price increases will have a negative impact on macroeconomic targets in 2022 and 2023. Therefore, it is necessary to control petroleum prices in a flexible way and ensure supply sources. 

The report also mentions the need to use taxes and fees to stabilize domestic petroleum prices, if the prices become overly high, affecting economic development and people’s life and neutralizing policies applied to recover the economy in the post-pandemic period.

In its report about Vietnam’s economy in June, the World Bank (WB) recommends that the Government apply temporary measures to give direct support to poor people to help them cope with rising fuel prices. 

With a series of recommendations and the government’s instructions, the adjustment of taxes is a necessity.

Macroeconomic stability is top priority

At present, a liter of petrol bears four kinds of tax, including VAT (10 percent), import tax (10 percent), luxury tax (10 percent) and environment protection tax (VND2,000 per liter of petrol and VND1,000 per liter of diesel and mazut).

According to economists, petroleum products bear a tax of VND7,000 per liter for the first three kinds of tax.

They said that it is necessary to cut the environmental tax, luxury tax and VAT to be able to prevent the prices from increasing too sharply.

However, reducing taxes is within the competence of the National Assembly. Phoc said MOF once intended to ask the National Assembly to authorize the National Assembly Steering Committee to make decisions on petroleum pricing so as to regulate petrol prices flexibly. However, after checking the Constitution, MOF realized that there must be approval from the National Assembly.

Meanwhile, it takes a long time to amend laws, from the time of programming the amendment, to discussion to approval. Since the environmental tax is within the competence of the National Assembly Steering Committee, it is easier to adjust the tax.

The petrol price has surpassed the VND32,000 per liter threshold, which puts unprecedented pressure on macro economy and inflation. The General Statistics Office (GSO) has reported that the CPI has climbed to a 5-year high because of petroleum price increases.

In addition to the environmental protection tax cut, it is necessary to consider lowering other taxes as well.

The view of ‘stabilizing macro economy and curbing inflation’ has been repeated in the government’s and National Assembly’s documents. High inflation will undermine all economic development achievements.

Tu Giang