People fill up their motorbikes at a fuel station in Hà Nội. — VNA/VNS Photo

The Vietnam Chamber of Commerce and Industry (VCCI) proposed that the Ministry of Finance, the drafting agency of the draft Law on Special Consumption Tax, consider removing petrol from the list of products with special consumption tax imposed on them.

The chamber said petrol, as a product, is taxed simultaneously by both special consumption tax and environmental protection tax, both designed to curb consumption. However, it is considered as a vital input for the economy.

The current special consumption tax for mineral fuels is at 10 per cent, E5 biofuel at 8 per cent and E10 biofuel at 7 per cent, on top of an environmental protection tax of VNĐ2,000 per litre. The chamber recommended policymakers consider removing some of the tax burden for domestically-produced fuels, leaving possibly just the one tax for regulatory purposes.

Supporters of the tax regime, including the Ministry of Justice and the Ministry of Agriculture and Rural Development proposed that the drafting agency to conduct additional study into which products should be excluded. They said, for example, E5 biofuel and E10 biofuel, should be considered as input into many production industries.

While petrol is considered an essential item, it is still produced using fossil fuels and its excessive use should not be allowed.

Economist Đinh Trọng Thịnh said the taxes are meant to encourage fuel-saving measures and are already set at the lowest possible rate in comparison with other products.

"The use of fossil fuel-based gasoline is discouraged by many countries worldwide, taking forms in various taxes on emissions, driving prices up. With the current prices, Việt Nam remains in the lower half of the global average,” he said.

The drafting agency has taken the side of the supporters, claiming mineral fuels, being a non-renewable source, should be conserved and that the environmental protection tax is a common practice around the world, encouraging fuel-makers to add more bio-content to benefit from lower tax rates. In addition, the effects of other tax laws, which are soon to take effect, will bring down the cost of vehicles of engine sizes of 2,000 cm³ or less.

In the big picture however, the special consumption tax and the environmental protection tax, among others, are but tools to regulate the flow of commerce, bolster the state’s budget and ensure macroeconomic stability. — VNS