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Move to triple green taxes riles Vietnamese firms

Feb 10. 2017
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THE VIETNAMESE Finance Ministry’s proposal to almost triple the environmental protection tax on oil and gas consumption would reduce businesses’ competitiveness against foreign firms, according to the Vietnam Chamber of Commerce and Industry (VCCI).

The chamber’s members say the tax would reduce local firms' competitiveness against foreign ones.

The VCCI sent their comments on draft amendments and supplements to the environmental protection law to the ministry expressing concerns over the proposed tax hike.

The ministry proposed an environment tax of 4,000 to 8,000 dong (Bt12.30) per litre of petrol (compared with the current 1,000-4,000 dong), 3,000-6,000 dong per litre of aviation fuel, 1,500-4,000 dong per litre of diesel oil, 300-2,000 dong per litre of kerosene, and 900-4,000 dong per kilogram of mazut.

The chamber said environmental protection taxes were not related to socio-economic development policies and should not be adjusted based on the policies.

Dau Anh Tuan, head of VCCI’s legal division, said petroleum was an essential product. If the ministry’s proposal aimed to limit the environmental effects by reducing petroleum consumption, it would not be very effective.

The VCCI pointed out that the proposed environment tax rise would hurt enterprises and the economy. It said fuel is an important input for the transport, agriculture and seafood sectors.

Statistics from the ministry’s Price Management Agency showed that fuels make up 25 to 45 per cent of costs of vehicles and 39.5 per cent of costs of airlines. Fuel accounts for 33 to 59 per cent of production costs in the seafood sector and transport makes up 35 to 40 per cent of farming costs. 

It also said the tax rise, which aimed to increase collection to the State budget, would have a negative impact on the economy as a whole. In contrast, tax cuts under the country’s commitments to trade agreements, would benefit local and foreign firms.

If the tax hike proposal were approved, Vietnamese companies would lose their competitiveness, the chamber said.

The VCCI called for a comprehensive and objective assessment of the impact of an environment tax increase for fuels on the economy and social welfare.

The ministry reported that environment tax revenue accounted for 4.1 per cent of total budget collections last year and 99 per cent of it came from fuels. The VCCI calculated the percentage would rise to 9.8 per cent if import, special consumption and value-added taxes were included.

The Ministry of Justice also asked the Finance Ministry to carefully consider the environmental protection increase as it would directly affect businesses and benefits for people.

It said the draft was not adequate and lacked assessments, with the proposed increase nearly triple compared to the current level.

The Ministry of Foreign Affairs also suggested the Finance Ministry should consider whether the proposal was necessary, especially as local firms have faced difficulties and petroleum is already subject to a number of taxes and fees.

The ministry also proposed supplementary assessments on socio-economic effects after the tax rise in the draft.

Earlier, the Finance Ministry said the tax increase was aimed at improving awareness of environmental protection, resulting in reduced consumption of goods that cause pollution.

The proposal was also believed to help prevent smuggling of petroleum as Vietnam’s petroleum prices have been lower than those other countries in the region.


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