Tax tools should be used effectively

The battle against single-use plastic products has not yet delivered any satisfactory results. Solutions are plenty, but what is lacking is their enforcement.

Tax tools should be used effectively
Vietnam ranks fourth in the world in the amount of plastic waste dumped into the ocean with 1.8 million tons a year-

The fact that the authorities are not aggressive enough to persist with the appropriate management tools may make winning this battle a mission impossible.

To deal with environmental issues in general and the current crisis of plastic bags in particular, countries around the world take various approaches which however may be classified into three groups of solutions: (i) prohibition, restriction, technical barriers; (ii) taxes and fees, subsidies, credit, infrastructure investment; (iii) advocacy.

Depending on the socio-economic conditions of each country, one or several solutions may be adopted at the same time as long as it is most efficient. For example, Kenya takes a very tough approach: bringing a criminal prosecution against the act of manufacturing and consuming disposable plastic bags. Meanwhile, in the UK, the government combines advocacy and heavy taxation on each plastic bag launched into market, a solution which proves to be very successful.

In Vietnam, through a project launched in 2013 with an aim of strengthening the control on environmental pollution caused by the use of plastic bags that are hard to decompose (Project 2013), it is clear that Vietnam has chosen a combination of multiple approaches, with the economic factor as the major focus. However, many years has passed since the Government expressed its determination to repel the “invasion” of plastic bags with a national-level project, and all we have done so far is mainly advocacy to raise people’s awareness of the harmful effects of plastic waste. The volume of plastic waste discharged into the environment has grown steadily and rapidly, and as a result, Vietnam ranks fourth in the world in the amount of plastic waste dumped into the ocean with 1.8 million tons a year (1).

In contrast, although we have taken an approach centering around the economic factor, with taxation as the main “weapon,” we have not been able to make full use of this “weapon” yet.

The environmental protection tax paradox

Heavy taxation imposed to restrict the manufacturing and consumption of single-use plastic products is a highly feasible solution that is commonly adopted in many countries.

Vietnam is also using environmental protection tax as one of the most important tools to reduce the use of persistent plastic bags. However, the percentage of this tax uncollected is unbelievable, up to more than 99% (2).

With the tax rate of VND40,000 per kilo of plastic bags produced, if properly collected, the revenue from environmental protection tax should be VND20 trillion per year. Yet, in 2017, tax agencies nationwide only collected VND54 billion, a sum too modest to have any impact on the production and consumption of plastic bags (3).

The above figures suggest the problem is not the tax rate, but apparently the efficiency of tax collection. However, instead of working out solutions to prevent or reduce tax revenue losses, taxmen believe the main reason is the rate of environmental protection tax remains low, and that it needs to be put up so as to have a great impact on the production and use of plastic bags. And so the tax rate is lifted to the ceiling defined by the Law on Environmental Protection Tax 2010, from VND40,000 to VND50,000 per kilo of plastic bags. Despite the hike and the current inefficient tax collection enforcement, the national budget will only receive an extra VND13.5 billion each year, according to the tax authorities (4).

Taxmen may be right when claiming that the biggest difficulty when collecting environmental protection tax on plastic bags is that up to 70% of production establishments are small households that pay presumptive taxes, lacking accurate accounting, invoices and vouchers. However, this is a lousy excuse for the tax loss of 99% mentioned above. Furthermore, in Vietnam, dealing with small-sized, spontaneous business establishments that do not fully implement the accounting, invoice and voucher regimes are not something new to local taxmen.

 

In addition, no matter which mechanism of tax declaration and payment is adopted, the declaration should reflect the taxable business activities of the payers. Then, as those who review and approves declarations of business owners, the taxmen involved can by no means dodge the responsibility and obligation to remedy any loss incurred, especially when the loss is that ridiculously great.

Here lies the bottleneck

If such environment protection tax loss is not well addressed, then no matter how high the tax rate is put up, the costs of making plastic bags will remain low and retailers will barely feel any pressure to refrain from distributing this source of waste en masse.

Meanwhile, if the problem of environment protection tax loss is successfully solved with the tax rate lifted, it is certain that the price of plastic bags will go up. The increased cost will force retailers to seriously reconsider the number of bags given to their customers for free or have consumers bear part of this cost. This will make a significant contribution to changing people’s habit of using plastic bags and discharging them into the environment.

Eco-friendly bags in troubled waters

In Project 2013, the Prime Minister asked ministerial and local agencies to develop a mechanism that assists the manufacturing, promotion and distribution of environmentally friendly packages and bags, replacing those plastic bags difficult to decompose. That said, at the moment, when there is only a year left to accomplish the ambitious plastic bag reduction objectives of this project, environmentally friendly bag makers are still struggling to survive on their own.

Given the high costs of production, it goes without saying that eco-friendly products are unable to compete with cheap plastic bags. Therefore, for environmentally friendly bag makers to survive, develop and repel plastic bags that are harmful to the environment, the State should quickly work out solutions to support such businesses. Moreover, taxes on materials for making disposable plastic products hard to decompose should be raised, along with the adoption of other tax policies, to make these products more expensive and uncompetitive with biodegradable products.

Once the production costs of two products having the same utility are similar, there will be no big difference in their selling prices. Then, consumers would know which products they should opt for. In other words, even without any subsidies or tax and fee incentives directly given by the State, businesses that produce eco-friendly products would still be able to claim victory in the battle against plastic bags that everyone knows are harmful to the environment and public health. SGT

(1) https://baovemoitruong.org.vn/cac-quoc-gia-gay-o-nhiem-moi-truong-bien-nhieu-nhat/

(2) https://laodong.vn/kinh-te/lo-hong-phap-luat-tu-thue-bao-ve-moi-truong-that-thu-nghin-ti-dong-voi-tui-nylon -632665.ldo

(3) and (4) https://laodong.vn/kinh-te/lo-hong-phap-luat-tu-thue-bao-ve-moi-truong-that-thu-nghin-ti-dong-voi -tui-nylon-632665.ldo

Lac Duy

 
 
 
 
 
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