Environmental tax for petroleum to be proposed to increase

	Allocating revenue from the Environmental Protection Tax for oil and gasoline
	Will encompass the tax management of e-commerce
	Adjustment on environmental protection tax for plastic bags and petroleum

An increase of the environmental protection tax framework does not affect the tax rate as well as the current price. Photo: H.V.

During preparation of administrative dossiers, the leaders of the Ministry of Finance have assigned the General Department of Taxation to revise and finalize the report on the implementation of the environmental protection tax; assigned the Financial Strategy and Policy Institute to take charge of reviewing, finalizing the report and supplementing the impact of the proposed policy compared to the previous report of the Ministry of Finance; and further study international experience on this issue.

The preparation shall be completed before 15th April 2017 for the Ministry of Finance to collect opinions of State units, organizations, and individuals on the draft Law. In May 2017, the Ministry of Finance will consult the Ministry of Justice for evaluation and submit the draft Law to the Government and the National Assembly in June 2017.

According to the schedule, in July 2017, the draft Law will be submitted to the Finance and Budget Committee for verification. In August 2017, the draft Law will be submitted to the Standing Committee of the National Assembly. In September 2017, the draft Law will be sent to National Assembly’s members after the Standing Committee of the National Assembly gave the opinion. In October 2017, the draft Law will be submitted to the National Assembly for approval.

Previously, the Ministry of Finance publicized the draft Law on Environmental Protection (revised) which adjusted the minimum gasoline, oil and petroleum tax rates to be similar to the current tax rates. The maximum tax rates of gasoline, oil and petroleum will be 2 times of the current tax rates. It means that the tax rate for gasoline, excluding ethanol, is 3,000-8,000 vnd per liter, fuel for aircraft is 3,000-6,000 vnd per liter, diesel is 1,500-4,000 vnd per liter; gasoline E5 is 2,700 - 7,200 vnd per liter and gasoline E10 is 2,500-6,800 vnd per liter. In particular, the tax rate of kerosene remains unchanged because kerosene is essential commodity for the majority of poor people and ethnic minorities in remote areas.

Regarding the reason of the above proposal, Mr. Vu Khac Liem - the Deputy Director of the Tax Policy Department, under the Ministry of Finance said: When Vietnam integrates deeply into the global market, the budget revenues and expenditures must be restructured. 10 years ago, the State budget revenues much depended on imports and exports now but in the coming time, the State budget revenues will decrease sharply due to integration commitments. It means that based on each period of the national economy, the State authorities should adjust taxes. Accordingly, environmental protection taxes shall replace import tax which must be gradually reduced according to national commitments to ensure the stability of the tax policy.

On the other hand, the retail price of petroleum and gasoline in Vietnam is basically lower than that of other countries which share the border and many other countries in ASEAN and Asia. Therefore, the use of domestic taxes to offset import tax will keep gasoline prices stable, in line with the prices of neighboring countries to prevent smuggling of petroleum.

According to current regulations, the environmental protection tax rate which is applied for petroleum and gasoline is equal or close to the price ceiling. Therefore, it is very difficult to adjust the environmental protection tax rate for petroleum and gasoline in line with the socio-economic development policy of the State. Therefore, is very necessary to adjust the environmental protection tax framework as a basis for adjusting the specific tax rate in the coming time.

The specific expenditure norm for environmental protection activities VCN- The Ministry of Finance issued Circular No. 02/2017/TT-BTC guiding on expenditure management for environmental protection activities.

"The proposal to increase the environmental protection tax framework will be suitable for adjusting the tax level in the coming time. If necessary, the Ministry of Finance shall submit to the Government and the Standing Committee of the National Assembly for adjusting the tax levels in line with the socio-economic development policy in each period. Therefore, this proposal does not affect the tax rate as well as the current price", Mr. Liem said.