The Ministry of Finance (MoF) is going ahead with its plan to increase environmental protection tax on petroleum from the current VND1,000-4,000 to VND3,000-8,000 per litre, despite objections from other ministries and the public.

In its second draft of the Law on Environmental Protection Taxes announced last week, the ministry proposed a tax hike on fuel consumption of VND3,000-6,000 per litre for aviation fuel, VND1,500-4,000 per litre for diesel, VND300-2,000 per litre for kerosene, and VND900-4,000 per kg for mazut.

If the new tax rate is applied, the price of gasoline at the pumps will rise to around VND22,000 (roughly US$1) per litre from the average price at the pump of around VND16,000 to VND17,000 for petrol and VND10,000 to VND11,000 for diesel and mazut, respectively, analysts said.

The Ministry of Transport (MoT) told the Ministry of Finance (MoF) that Viet Nam would apply two petroleum quality standards based on the Euro 2 and Euro 4 emission standards, suggesting that the MoF set a lower environmental protection tax for Euro 4, which cleans emissions from diesel cars, to encourage the production of more eco-friendly petroleum.

The Viet Nam National Petroleum Group (Petrolimex) said the calculation of environmental protection tax on fuel should encourage E5 bio-fuel consumption.

The Viet Nam Petroleum Association (VINPA) has supported the MoF’s tax proposal, though it has pointed out that the maximum tax of VND8,000 per litre is too high.

The VINPA has suggested that the MoF hike environmental protection tax from the current VND3,000 to VND5,000 per litre for petrol; from VND1,500 to VND3,000 per litre for diesel; from VND3,000 to VND5,000 per litre for aviation fuel; and from VND900 to VND3,000 per kg for mazut.

Earlier, the Ministry of Foreign Affairs said the MoF should carefully consider its tax hike proposal as local businesses, which are already paying many kinds of taxes and fees, will be further hit. It asked the MoF to do an assessment on the impact of the tax hike on the economy and people’s lives.

The draft law is scheduled to be submitted to the Finance-State Budget Committee of the National Assembly (NA) for consideration this month. It will be submitted to the NA Standing Committee in August, and to NA deputies in September. The NA will review the draft law for approval in October.

MoF’s deputy minister Tran Xuan Ha said the tax hike is one of the measures to better manage petroleum products while limiting smuggling. Its impact on businesses, people and inflation will be calculated, he added.

Last year, around VND42.3 trillion ($1.9 billion) was collected in environmental protection tax, of which petroleum raked in VND40.2 trillion. — VNS