According to Vu Hong Long, Director of the Department for Tax Revenue Estimation, every drop of $1 in oil prices results in a loss of VND1.5 trillion to the State budget. — Illustrative image/ Photo All Out

HA NOI (Biz Hub) — Tax authorities anticipate collecting at least VND680 billion (US$30.4 million) in the remaining ten months of 2016, a 19 per cent increase over the same period last year and seen as a sign that the Vietnamese economy was continuing to recover.

Yet, collecting these taxes is expected to require great efforts by tax agencies, since global oil prices remain low and many regions face severe droughts and saltwater intrusions, Nguyen Dai Tri, Deputy General Director of the General Department of Taxation, said at yesterday's press conference.

According to Vu Hong Long, Director of the Department for Tax Revenue Estimation, every drop of $1 in oil prices results in a loss of VND1.5 trillion to the State budget. He further said, if oil prices remained at $30 per barrel, budget revenues could decrease by VND45 trillion, compared to the current estimate.

Long noted that the department created plans to cope with the possibility of further drops in oil, even to $20 per barrel, to ensure the budget remains balanced.

Although oil prices were unpredictable and tax revenues from crude oil accounted for a modest percentage in the central budget, Long said that revenues from oil could not be eliminated from budget revenue estimates.

Regarding the option of temporary closings of oil fields in case oil prices continued to fall below production costs, Nguyen Van Phung, Director of the Large Taxpayers Office, said this action would demand careful consideration. Sometimes, firms should accept short-term losses, since the resumption of operations of oil fields could be very costly. Phung noted that the Government would not provide compensation for losses sustained by high-cost oil companies.

Phung also said that plunging oil prices were not all bad news, as firms could benefit from lower fuel prices by earning higher profits. This would also mean higher collections of value added taxes and corporate income taxes for local budgets.

Additionally, taxation general department statistics revealed that tax revenues for the State budget reached VND145.75 trillion in the first two months of this year, equivalent to 17.4 per cent of the estimate for the full year and rising by 6.1 per cent over the same period last year.

Meanwhile, collections from crude oil were VND5.77 trillion, equal to only 43.1 per cent from the same period last year. Oil prices hovered around $30 per barrel in the two-month period, while the price for budget estimates was set at $60 per barrel.

The taxation department said that in the remaining months of this year, it would hasten administrative reforms and the implementation of e-tax filing and payments, as part of a wider effort to improve the business climate and remove difficulties for firms. — VNS