Proposal to reduce environmental protection tax on many gasoline and oil products

In this draft, the Ministry of Finance proposes to reduce environmental protection tax for gasoline, oil and grease as follows:

Petrol (except ethanol) decreased by 1,000 VND/liter, from 4,000 VND/liter to 3,000 VND/liter.

Diesel, fuel oil, and lubricating oil reduced by 500 VND/liter, from 2,000 VND/liter to 1,500 VND/liter.

Kerosene decreased by 500 VND/liter, from 1,000 VND/liter to 500 VND/liter.

Grease reduced by 500 VND/kg, from 2,000 VND/kg to 1,500 VND/kg

Jet fuel: kept at the current level, being reduced at 1,500 VND/liter according to Resolution No. 13/2021/UBTVQH15 dated December 31, 2021 of the National Assembly Standing Committee.

Environmental protection tax rates for gasoline, oil and grease are expected to apply from the effective date of the Resolution to the end of December 31, 2022.

To ensure the timeliness of the policy, the Ministry of Finance proposes that the Resolution take effect from the date of signing. At the same time, in order to ensure convenience in search, the Ministry of Finance proposes to stipulate the environmental protection tax rate for jet fuel in this Resolution, whereby the Resolution will annul Resolution No. 13/2021/UBTVQH15 dated 31 February 2021 of the Standing Committee of the National Assembly.

According to current regulations, the environmental protection tax rate for gasoline (except ethanol) is 4,000 VND/liter (the ceiling in the tax bracket); diesel oil is 2,000 VND/liter (the ceiling in the tax bracket); kerosene is 1,000 VND/liter (the ceiling in the tax bracket is 2,000 VND/liter); fuel oil is 2,000 VND/liter (the ceiling in the tax bracket); lubricant is 2,000 VND/liter (the ceiling in the tax bracket) and grease is 2,000 VND/liter (the ceiling in the tax bracket).

Particularly, the environmental protection tax rate for jet fuel is currently implemented according to Resolution No. 13/2021/UBTVQH15 dated December 31, 2021 of the Standing Committee of the National Assembly, which is 1,500 VND/liter from January 1, 2022 to the end of December 31, 2022 (50% reduction compared to the tax rate specified in Resolution No. 579/2018/UBTVQH14) and 3,000 VND/liter from January 1, 2023.

The budget revenue will reduce by nearly 12 trillion VND/year

Expected impact on the state budget, according to the Ministry of Finance, with the consumption of gasoline, oil and grease in 2022 will be equivalent to 2019 and the environmental protection tax rate for gasoline, oil and grease as proposed, it is expected that the environmental protection tax revenue for gasoline, oil and grease will decrease by 14,524 billion VND/year, thereby reducing state budget revenue (including environmental protection tax and value added tax) for the whole year by about 15,976 billion VND/year (the average reduction in state budget revenue per month is 1,331.4 billion VND/month).

Including the reduction of the environmental protection tax rate for gasoline, oil and grease from April 1, 2022, the reduction in state budget revenue (including environmental protection tax and VAT) will be about 11,982 billion VND.

Environmental protection tax is an indirect tax, collected on products and goods when used, causing negative impacts on the environment, so the cost of environmental protection tax will be transferred to the cost of products and goods subject to environmental protection tax and consumers shall be the last persons to bear the environmental protection tax.

The environmental protection tax on gasoline, oil and grease will directly contribute to reducing the retail prices of these items.

For gasoline (except ethanol), the reduction of the environmental protection tax rate of 1,000 VND/liter compared to the current one will reduce the retail price (including VAT) by 1,100 VND/liter, respectively.

For diesel, fuel oil, lubricants: With the reduction of the environmental protection tax rate of 500 VND/liter compared to the current one, the retail price (including VAT) will be reduced by 550 VND/liter, respectively.

For kerosene, with the reduction of environmental protection tax of 500 VND/liter compared to the current retail price (including VAT) the corresponding decrease is 550 VND/liter.

For grease, with the reduction of the environmental protection tax rate of 500 VND/kg compared to the current one, the retail price (including VAT) will be reduced by 550 VND/kg respectively.

According to calculations by the Ministry of Finance, the increase and decrease in gasoline prices will generally affect domestic production and consumption. At the same time, the change in the price of one item will lead to a certain fluctuation in the price of other commodities, as shown by the change in CPI.

The reduction of environmental protection tax on gasoline, oil and grease will contribute to reducing selling prices, thereby limiting the increase in production costs, reducing production costs, and stabilizing inflation.

With the assumption that the effective time of the environmental protection tax reduction measure is from April 1, 2022 and the domestic retail price of petrol and oil is stable at the current level in the remaining 9 months of 2022, the impact of this measure is estimated to be stable. Tax reduction measures help reduce the average CPI in 2022 by about 0.67%.

In the context that gasoline prices are at the highest level ever, the reduction of environmental protection tax by up to 1,000 VND/liter of gasoline will contribute to ensuring the harmony of interests between people, businesses and the State, contributing to the direct discount on this item.

Petrol is an input fuel for most production industries in the economy. The reduction of environmental protection tax on gasoline, oil and grease will contribute to reducing production costs and product prices; and at the same time contribute to reduce consumption costs of gasoline, oil and grease for people.