Why did excise tax on petroleum not adjust?

According to international practices, gasoline is always subject to excise tax. Source: Internet

The Ministry of Finance said that, according to the regulation of Law on excise duty, gasoline is subjected to excise tax but oil of all kind is not subjected to excise tax. The tax rate for gasoline is 10%, E5 is 8% and E10 is 7%. The Law on excise duty does not stipulate tax reduction for goods and services that are subjected to excise tax.

According to the Ministry of Finance, excise tax is an indirect tax, levied on a number of goods, items and services that are discouraged for consumption by the State, due to causing harm to health (cigarettes, alcohol, beer), impacting the environment (fossil-based gasoline) or high-class goods and services that need to regulate revenue (cars, planes, yachts, golf). Gasoline is a fossil-based and non-renewable fuel that needs to be used sparingly, so according to international practices, it is always subject to excise tax.

The international experience showed that most countries in the world collect excise tax on gasoline. The Ministry of Finance gives examples; France (0.6629 EUR/liter for E10 gasoline and 0.6829 EUR/liter for mineral spirit); Germany (0.6545 EUR/liter for gasoline with sulfide content less than 10mg/kg, 0.6698 EUR/liter for gasoline with sulfide content above 10mg/kg); Netherlands (0.81314 EUR/liter); Italy (0.7284 EUR/liter); UK (0.5795 pounds/litre); Korea (311 Won/liter of absolute tax and 15% tax rate); China (1.52 yuan/liter); Australia (AU$0.442/litre); Cambodia (25% tax rate); Thailand (6.50 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, 3.2 baht/liter for diesel oil); Singapore (0.41 Singapore dollars/liter); and Laos (tax rate 39%).

The excise tax rate on gasoline in Vietnam is currently at a low average level compared to other countries. According to statistics, the estimated revenue of excise tax on gasoline in the first five months of 2022 is about VND6,503 billion. If the world oil price in the last seven months of 2022 averages about US$110/barrel, the excise tax revenue on gasoline in the last seven months of 2022 is estimated at VND9,614 billion. At that time, the total revenue of excise tax on gasoline for the whole year 2022 is expected to be about VND16,117 billion.

If the world oil price in the last seven months of 2022 averages about US$120/barrel, the revenue of excise tax on gasoline in the last seven months of 2022 is estimated at VND10,488 billion (average VND 1,498 billion/month). At that time, the total excise tax collection on gasoline for the whole year 2022 is expected to be about VND 16,991 billion.

According to the Ministry of Finance, in Vietnam, the Law on excise duty has stipulated that gasoline is subject to tax since 1999. This regulation is consistent with the target of excise tax collection and in accordance with international practices.

According to statistics in 2019 (before the Covid-19 pandemic), domestic consumption of gasoline products accounted for about 37% of total gasoline and oil production. On the other hand, at present, only gasoline products are subject to excise tax. Therefore, if implementing excise tax reduction for gasoline products, is not really effective and has not achieved the goal of tax reduction, which is to help reduce input costs for production and business activities and to curb inflation because oil is the main commodity for production and business activities. Besides that, in the case of adjustment of the excise tax rate for gasoline, it must adjust the excise tax rate corresponding to E5 gasoline and E10 gasoline.

The Ministry of Finance said that, in terms of competence, the adjustment of excise tax falls under the authority of the National Assembly, so it must be submitted to them for consideration and decision-making. It often cannot be applied immediately, while gasoline prices have significant fluctuations so there will be a certain delay.

For the above reasons, the Ministry of Finance proposed that in the immediate future, it should not adjust and reduce the excise tax on gasoline. The Ministry of Finance will coordinate with relevant agencies to continue monitoring petroleum price movements in the world and will submit to the Government for submission to the National Assembly a plan to reduce the excise tax on gasoline in the form of a Resolution of the National Assembly in case gasoline prices continue to increase and have unpredictable fluctuations, affecting petroleum supply that needs to continue to reduce taxes on gasoline products to contribute to controlling inflation.