Proposal to adjust tax rate of imported raw material for producing petroleum

illustration image. Source: Internet

Specifically, for condensate products, this item is under HS code 2709.00.20, the MFN tax rate is 3%, the normal import tax is 4.5%, the tax rate in FTAs ​​(ATIGA, ACFTA, AKFTA, AANZFTA is 5%, AJCEP, VJEPA, AIFTA, VCFTA is 3%; VKFTA, VNEA-EU, EVFTA, CPTPP is 0%).

According to the Ministry of Finance, in Vietnam, the condensate producer is PetroVietnam Gas Joint Stock Corporation (PV GAS). Every year, the company produces about 250,000 tons of condensate from Cuu Long and Nam Con Son gas sources at Dinh Co and Nam Con Son gas processing plants. Currently, condensate in Vietnam is mainly used to produce Liquified Petroleum Gas (LPG), gasoline, diesel oil (DO), and fuel oil (FO).

Condensate is a raw material extracted from nature with similar properties to crude oil but with a light composition. According to the principle of promulgating tax schedules and rates, raw unprocessed natural resources and minerals are prescribed high export tax rates to limit exports and low MFN import taxes to encourage imports and protect unprocessed mineral resources in the country.

Accordingly, in the draft Decree on Export Tariff and Preferential Import Tariff, the Ministry of Finance plans to submit to the Government to reduce the MFN import tax of HS code 2709.00.20 from 3% to 0%. Accordingly, to ensure the source of raw materials for petroleum production, the Ministry of Finance proposes to reduce the normal import tax rate of HS code 2709.00.20 from 4.5% to 0%.

The Ministry of Finance affirmed that the adjustment to reduce the normal import tax rate for this item does not reduce the state budget revenue because there was no import turnover arising at the normal import tax rate. However, the implementation of the plan is expected to contribute to creating conditions for domestic oil refineries, including Dung Quat Oil Refinery, to access raw materials at lower costs, thereby contributing to reducing costs and increasing domestic production of petroleum.

As for T-DAO products (HS code 2710.19.90) and VGO items (HS code 2710.19.90 that is the same HS code as the above-mentioned T-DAO item) or HS code 2710.20.00 (depending on oil quality), these are raw materials, intermediate products for oil refineries and are used to increase the output of valuable products at the plant. The source of imported products is come from many areas depending on the weight of petroleum and bituminous minerals present in the product.

The above items have MFN tax of 5%, normal import tax of 7.5%, FTA tax rate (ACFTA is 8%, AANZFTA, AIFTA, AJCEP, VJEPA, VCFTA, VN-EAEU is 5%; CPTPP is 7%; ATIGA, AKFTA, VKFTA is 0%).

In the draft Decree on the Export Tariff and the Preferential Import Tariff, the Ministry of Finance has also submitted to the Government to reduce the MFN import tax of HS codes (2710.19.90, 2710.20.00) from 5% to 0%. Accordingly, to diversify import sources and contribute to alleviating pressure from gasoline and oil prices as well as lacking raw materials for Dung Quat refinery plant, the Ministry of Finance proposed to reduce the normal tax rate for the following HS codes (2710.19.90, 2710.200) from 7.5% to 0%, contributing to reducing input costs and facilitating the expansion of raw material supply for Dung Quat Refinery.

With this policy, the Ministry of Finance believed that adjusting and reducing the normal import tax rate for this item will not reduce state budget revenue. For domestic production, the reduction of the normal import tax rate following the plan is expected to contribute to reducing input costs for domestic petroleum production, and expanding access to raw materials for domestic petroleum production to new markets. From there, it will create conditions to increase the supply of domestically produced gasoline, thereby reducing dependence on imported finished petroleum products, and contributing to ensuring national energy security, especially in the context of the oil and gas market is forecast to remain volatile.

Regarding residue items (HS code 2713.90), the MFN import tax is 0%, the normal import tax is 5%, the tax rate at FTAs ​​is 0%. According to the General Department of Vietnam Customs, in 2021, this item was not generated import turnover from normal import tax.

Although the import turnover from normal import tax is currently absent, in order to diversify the import market for Binh Son Refining and Petrochemical Joint Stock Company, contributing to ensuring the supply of domestically produced raw materials and avoiding price pressured by traditional markets, in Official Letter No. 8437/BTC-CST, the Ministry of Finance proposed to reduce the normal tax rate of HS code 2713.90 from 5% to 0%.

This adjustment will create conditions for businesses to access other import markets to import raw materials for domestic petroleum production. From that, contributing to stabilizing the petroleum supply for the domestic market, limiting dependence on imported petroleum products.

Particularly, for propylene items that are under HS code 2901.22.00, with the MFN tax rate and the FTA tax rate being 0%, the normal import tax is 5%. According to the General Department of Vietnam Customs statistics, in 2021, this item will not generate import turnover from normal import tax.

In Official Letter No. 8437/BTC-CST, the Ministry of Finance proposed to reduce the normal import tax of HS code 2901.22.00 from 5% to 0% because the MFN tax rate and FTAs ​​have been reduced to 0%, and the adjustment. This adjustment does not reduce state revenue collection. In addition, the reduction of normal import tax will increase opportunities and tax advantages when offered in countries that do not have the most-favored-nation treatment relationship with Vietnam (countries that are not members of the WTO and have not signed an FTA with Vietnam).

The Ministry of Finance also affirmed that the normal import tax reduction for this item does not reduce state revenue collection and will facilitate businesses to access more new import markets to import raw materials for the production of plastic pellets for domestic input materials, thereby, contributing to reducing production costs.