Environmental protection tax: appropriate solution for environmental problems

According to the Ministry of Finance (MOF), from 2012-2016, state budget’s expenditures on environmental protection were 26,371 billion vnd per year on average, higher than environmental protection tax revenues of...

According to the Ministry of Finance (MOF), from 2012-2016, state budget’s expenditures on environmental protection were 26,371 billion vnd per year on average, higher than environmental protection tax revenues of 21,197 billion vnd/year on average.  

Retail price of petroleum in Vietnam is lower than those in other bordering countries and ASEAN countries. Photo: H. Van

Expenditures are higher than revenues

According to the latest statistics of the MOF, the revenues from environmental protection tax were increasing steadily from 2012 to 2016. The total revenue from environmental protection tax from 2012 to 2016 was 105,985 billion vnd, accounting for 1.36% – 4.27% of the total State budget revenue and about 0.34% – 0.97% of annual GDP.

Total State Budget expenditure on environmental protection for period 2012-2016 was about 131,857 billion vnd, in which the regular expenditure on environmental protection reached 89,131 billion vnd, including regular budget expenditure on environmental protection (less than 1% of total budget expenditure) was 52,420 billion vnd; on economic activities was 36,711 billion vnd. Total state budget expenditure on development investment for programs and projects of natural resource and environment sector; water supply and waste and wastewater treatment sector was 24,246 billion vnd. Total expenditure from the central budget reserve to prevent, control and overcome consequences of natural disasters and support to the localities to handle unscheduled and urgent tasks in the year such as dikes and reservoirs was about 18,480 billion vnd.

Increasing tax rates for harmful products.

Despite positive effects, in the recent 5 years, the law system has many changes and the current provisions have many exigencies and obstacles upon practical application. Therefore, the MOF proposed amending and supplementing the Law on Environmental Protection and focusing on amending environmental protection tax rates.

Sharing about this content, Mr. Pham Dinh Thi – Director of Tax Policy Department under the MOF stated that the first amendment was for petrol, oil, and grease. The current tax for petrol was from 1,000-4,000 vnd/ liter. The current environmental protection tax rate for petrol was 3,000 vnd/liter, nearly equal to the maximum rate; for aircraft, fuel was 3,000 vnd / liter, equal to the maximum rate. Thus, it was necessary to adjust the environmental protection tax rate for petrol and oil in order to promptly respond to world oil price fluctuations and in line with the State policies on socio-economic development in each period.

The adjustment of environmental protection tax rate bases on three main factors. Firstly, import duty was gradually cut down as committed in the 11 free trade agreements that Vietnam has joined. Secondly, the current retail price of petroleum in Vietnam was basically lower than that in other ASEAN countries. Specifically, 17,270 vnd / liter lower than Singapore, 27,038 vnd/liter lower than Hong Kong/liter. Thirdly, the tax rate (including import duty, Special Consumption Tax, Environmental Protection and VAT) on the basic price in Vietnam on 2 May 2017 was at 11.59% – 37.49%, much lower than that in many countries in the world. Meanwhile, this rate in Korea was about 70.3% and Thailand about 67%.

“Based on considering all the above factors, the MOF has proposed increasing the environmental protection tax rate from 1,000-4,000 vnd/ liter to 3,000-8,000 vnd / liter for petrol; from 1,000-3,000 vnd/liter to 3,000-6,000 vnd/ liter for aircraft fuel; from 500-2,000 vnd/liter to 1,500-4,000 vnd/ liter for diesel oil. Particularly, proposing maintaining the current environmental protection tax rate for kerosene as it is an essential commodity for the majority of the poor and ethnic minorities in remote and isolated areas. And proposing increasing from 300-2000 vnd / liter, kg to 900-4,000 VND / liter, kg for remaining oil “- Mr. Thi said.

In addition to petrol and oil, Hydrogen-chlorofluorocarbon liquid (HCFC) and taxable plastic bags also have a bad impact on the environment when used. Therefore, the MOF proposed adjusting the environmental protection tax rate for HCFC liquid from 1,000-5,000 vnd/ kg to 4,000-20,000 vnd/ kg; for plastic bags from 30,000-50,000 vnd / kg to 40,000-200,000 vnd / kg. This adjustment aimed to further enhance the responsibility and awareness of organizations and individuals on the environment, contributing to reducing the gradual use of these products in accordance with Vietnam’s commitments under the Montreal Protocol on restrictions on uses of ozone-depleting substances and absolute elimination of uses of HCFC liquid by 2030 and in accordance with international practice on the application of high environmental protection rates or the ban on manufacture, sale and use of plastic bags.

The Standing Committee of the National Assembly submitted the draft revised Law on Environmental Protection to the National Assembly and proposed presenting it at the 4th session for consideration and approval.


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