Most ministries agree to reduce the excise tax on gasoline and VAT on petrol and oil

Most countries collect excise tax on gasoline. Photo: T.D

The majority agree with the goal of the Resolution

In the future, gasoline prices on the world market are forecast to continue to fluctuate unpredictably. The prolonged Russia-Ukraine conflict would pose many potential risks of disrupting the supply of the world's crude oil, especially in the context that major oil-producing countries such as the US or OPEC countries are unlikely to immediately increase the level of oil production to make up for the current shortfall. Besides that, the response of many countries around the world to concerns about the global economic recession or the tendency to increase interest rates in many countries to curb the increase in prices and inflation will also make the forecasting of petroleum prices more difficult.

To implement the socio-economic development goals set by the Party and State for 2022 and control inflation in the last months of 2022 and early 2023, the Ministry of Finance said that it was necessary to submit to the National Assembly to make the reduction of excise tax on gasoline and value-added tax (VAT) on petrol and oil as well as the specific application time of tax reduction if the world price of petrol and oil continued to fluctuate, it would increase or remain at a high level, affecting the inflation index, the macro-economy, people's living standards and economic growth.

Recently, the Ministry of Finance has just completed the draft Resolution of the National Assembly on reducing the excise tax on gasoline and VAT on petrol and oil, then sent it to the Ministry of Justice for appraisal before submitting it to the Government for submission to the National Assembly.

The Ministry of Finance said that on September 23, 2022, the Ministry of Finance issued Official Letter No. 9691/BTC-CST to consult ministries and local governments, the Vietnam Federation of Trade and Industry (VCCI) and the Vietnam Petroleum Association (VINPA).

The ministry also posted on the websites of the Ministry of Finance and the Government to collect opinions from organizations and individuals participating in the Draft Resolution of the National Assembly on reducing the excise tax on gasoline and VAT for petrol and oil.

As a result, the Ministry of Finance has received comments from a number of ministries, localities, business associations and individuals (10 ministries and ministerial-level agencies; 18 localities; and four associations and individuals).

Through the synthesis of opinions, it was found that all agreed on the necessity, purpose and viewpoint of the draft Resolution. The majority completely agreed with the content of the draft resolution.

Most countries collect excise tax on gasoline

Notably, there is a suggestion on considering to research and evaluate the impact of the policy of exemption and reduction of the whole excise tax on gasoline in the case that world gasoline prices are abnormally high.

Responding to this, the Ministry of Finance said that, according to the provisions of the law on excise tax, the excise tax is only collected for gasoline, it would not collect excise tax for all types of oil. The excise tax rate for gasoline is 10%, E5 gasoline is 8% and E10 gasoline is 7%. The law on excise tax does not stipulate tax reduction or exemption for goods and services subject to excise tax. Regarding competence, the adjustment to excise tax falls under the National Assembly, so it must be submitted to the National Assembly for consideration and making decision.

The Ministry of Finance further explained that excise tax was an indirect tax, levied on a number of goods and services that the State discourages consumption of because it was harmful to health (tobacco, alcohol, beer), needed to be consumed economically (fossil-based gasoline) or luxury goods and services that need to be regulated for income (cars, airplanes, yachts).

Gasoline is a fossil fuel, so it needs to be used sparingly, so most countries collect excise tax on gasoline. The Ministry of Finance gave an example: France collects excise tax (0.6629 EUR/liter for E10 gasoline and 0.6829 EUR/liter for mineral gasoline); Germany (0.3545 EUR/liter); Italy (0.4784 EUR/liter); the United Kingdom (0.5295 pounds/litre); South Korea (311KRW/liter absolute tax and 15% tax rate); Australia (AU$0.221/litre); Thailand (6.5 baht/liter for mineral gasoline; 5.85 baht/liter for 95 E10 gasoline; 5.2 baht/liter for 95 E20 gasoline; 0.975 baht/liter for 95 E85 gasoline; 2.99 baht/liter for diesel oil); Singapore (0.41 Singapore dollars/liter); China (1.52 yuan/liter, equivalent to 15.6%); Cambodia (tax rate of 15%); Laos (tax rate of 16%).

Thus, the excise tax rate on gasoline in Vietnam is currently at a low level compared to other countries, especially lower than the countries which are sharing a border with Vietnam such as Laos, Cambodia, and China.

In the comments of ministries and local governments, there are suggestions for supplementing and clarifying the necessity of assigning the Standing Committee National Assembly to stipulate the "time to apply tax reduction" and principles for determining the "tax reduction application period”.

In this regard, the Ministry of Finance said that according to the provisions of the Law on excise tax and Law on VAT, the reduction of excise tax and VAT falls under the competence of the National Assembly.

Thus, to ensure flexibility, appropriate with reality, the draft Resolution only submits the tax reduction principle without specifying the plan and assigns the authority to the Standing Committee National Assembly to make a decision when the gasoline prices increase sharply.

The decision of reducing tax as well as the time for applying a specific tax reduction must be based on calculations and proposals of the Government, based on the actual situation of petrol price movements and on the basis of the state budget's ability to balance and support.