VietNamNet Bridge - A loss of VND10 trillion (over $445 million) in tax revenue from petroleum imports occurred in the first 11 months of the year, according to a report released by the General Department of Customs (GDC).

The loss was due to FTAs under which Vietnam has to cut import tariffs on petroleum products.

Luu Manh Tuong, director of the GDC’s Import/Export Tax Department, said the crude oil exports in 2016 see sharp decreases in both quantity and export prices. However, he stressed that the major reason behind the sharp reduction in tax revenue is the implementation of a series of FTAs, including the Vietnam-ASEAN and Vietnam-ROK agreements.

The tariff cuts applied to specific markets have prompted Vietnamese importers to place orders with new markets.

Under the Vietnam-ROK FTA, which took effect recently, import petrol from ROK is taxed 10 percent, just half of the MFN tax rate. 

Diesel imports from ROK are taxed 5 percent, mazut zero percent, kerosene 5 percent and air fuel 5 percent, while MFN rates are 10 percent, 10 percent, 13 percent and 10 percent, respectively.

A loss of VND10 trillion of dong in tax revenue from petroleum imports occurred in the first 11 months of the year

The lower tariffs on imports from ROK and ASEAN countries explain why the imports from Taiwan and China have decreased sharply. Kuwait was the third largest petroleum exporter to Vietnam in 2012. But in 2016, Vietnamese enterprises have not imported products from the market.
 
Instead of these markets, Vietnamese enterprises have found new suppliers, mostly ASEAN ones (Singapore, Malaysia and Thailand) and South Korea.

The petroleum imports from three ASEAN countries have been increasing since 2013. The increases were 22 percent in the first 10 months of 2014, 70 percent in the first 10 months of 2015 and 27 percent in the first 10 months of 2016.

As for South Korea, the imports only began increasing last December, when the Vietnam-ROK FTA took effect and tariffs cut to 0-10 percent.

The tariffs are the most competitive in markets from which Vietnam imports petroleum products. Vietnamese enterprises have shifted to import from South Korea.

By the end of October 2016, Vietnam had imported 1.34 million tons of petroleum products from South Korea, up five times compared with the same period last year. No other exporter has gained such a high growth rate like South Korea.

Experts predicted that the loss of tax revenue would even be higher in 2017 and 2018, when Nghi Son and Dung Quat Oil refineries in Vietnam become operational.