MoF's proposal to increase taxes on petroleum products is unreasonable

Low rate of import tax is currently imposed on petroleum products. The import tax will be reduced to zero per cent from January 01, 2018 for some markets. By 2024, tax on petroleum imports from the ASEAN market will be reduced to zero per cent under ASEAN’s Free Trade Agreement.

However, as proposed in draft law by Ministry of Finance (MoF), the EPT and VAT imposed on petroleum products will be raised.

While the current EPT on petroleum products is from VND1,000 to 4,000 (roughly US$0.04 to 0.18) per liter, the proposed EPT is from VND3,000 to 8,000 (equivalent to US$0.13 to 0.35) per liter. This draft will submit to the National Assembly for review at the next meeting in October and is expected to take effect on July 01, 2018.

At the seminar "Suggestions on the draft law amending and supplementing some articles of five tax laws" organized by the Chamber of Commerce and Industry of Vietnam (VCCI), Lawyer Truong Thanh Duc, Chairman of the Members' Council of BASICO Law Firm said that the imposition of excise tax is to regulate the consumption but in fact it restricts and discourages the consumption.

However, it is important to reconsider the reasons for regulating or restricting consumption of petroleum products whether due to danger, toxicity, luxury, waste or other reasons. In case of danger and toxicity, the EPT has been already imposed on these products. As a result, it is unreasonable to impose both EPT and VAT on all kinds of petroleum products, Duc emphasized.

Increase in EPT on petroleum products, according to VCCI, will affect the economy as a whole.

As analyzed by VCCI, the enterprises’ input costs and financial obligations have recently tended to increase sharply. Therefore, impacts of increase in EPT on petroleum products should be sufficiently and objectively assessed for Viet Nam’s entire economy and social welfare.

On September 13, a meeting on suggestions on the draft law amending and supplementing some articles of EPT law was held by the Standing Committee of the National Assembly. Nguyen Thi Kim Ngan, Chairwoman of National Assembly said the government should seek solutions to increase the State’s budget through other sources such as the settlement of tax liabilities, outstanding taxes, trade frauds… other than trying to raise some taxes.

"While the current tax frame on petroleum products has not been fully utilized, it is now proposed to double. In addition, these products are not the top factor causing environmental pollution; therefore, it is illogical to raise the EPT”, Ngan highlighted.