The supply of petrol and oil is still facing difficulties. Photo: Nguyễn Thanh

Need to extend the tax reduction

According to Ministry of Finance, the price of finished petroleum products is forecast at 95-105 USD/barrel in 2023 (decreasing 12% to 20% compared to the average estimate in 2022). The price of finished petroleum products is estimated to decrease compared to the average price in 2022 but is still remains at a high level. This will negatively affect the economy.

Along with that, in the context of high consumption and use of gasoline to recover the economy post-pandemic, petroleum consumption is forecasted to be about 14.50 million m3 (or tons) in 2023, an increase of 10% compared to the consumption output in 2022. In particular, it is estimated that gasoline will reach about 10.97 million m3 (accounting for 42.3%), diesel will reach about 14.50 million m3 (accounting for 55.9%), fuel oil reached about 0.43 million tons (accounting for 1.6%), kerosene hit about 0.051 million m3 (accounting for 0.2%).

The Ministry of Finance said that in the context of the world petroleum market's still witnessing complex developments, in the coming time, gasoline prices will continue to fluctuate unpredictably and pose potential risks to the socio-economic stability as well as impacts on the domestic petroleum market. The increase of the environmental protection tax rate on gasoline, oil and grease from the floor to the ceiling from January 1, 2023 (the period close to the Lunar New Year) will have a certain influence on people's activities as well as production and business activities of enterprises, thereby affecting the inflation and will have a direct impact on macroeconomic stability. Therefore, it is necessary to have solutions to contribute to stabilizing gasoline prices and stabilizing the macro-economy in 2023.

Pursuant to the competence prescribed in the Law on Environmental Protection Tax and the opinions of the National Assembly Standing Committee in Report No. 362/BC-UBTVQH15 dated November 11, 2022; from the solutions of domestic petroleum price control in recent years, to avoid negative impacts when the environmental protection tax rate increases to the ceiling level in the tax bracket from January 1, 2023 as well as to limit the negative effects due to the high forecasted gasoline price, thereby contributing to macroeconomic stability, the Ministry of Finance confirmed submission to the National Assembly Standing Committee for promulgation a Resolution to adjust the environmental protection tax rate for gasoline, oil and grease to apply in 2023 (applying the floor level in the tax bracket as prescribed in Resolution No. 20/2022/UBTVQH15 of the National Assembly Standing Committee) is necessary.

Revenue collection is forecast to be reduced by more than VND 50 trillion

Recently, the Ministry of Finance completed the second draft of the Resolution of the National Assembly Standing Committee on environmental protection tax for gasoline, oil and grease in 2023. According to the draft Resolution: tax on environmental protection for gasoline products was reduced from VND4,000/liter to the floor level of VND1,000/liter. Aviation fuel decreased from VND3,000/liter to the floor level of VND1,000/liter. Diesel oil decreased from VND2,000/liter to the floor level of VND500/liter. FO oil and lubricant oil were reduced from VND2,000/liter to the floor level of VND300/liter. Grease decreased from VND2,000/kg to the floor level of VND300 VND/kg. Kerosene fell from VND1,000/liter to a floor level of VND300/liter.

From January 1, 2024, the environmental protection tax rate for gasoline, oil and grease will continue to comply with Resolution No. 579/2018/UBTVQH14 of the National Assembly Standing Committee (petrol is VND4,000/liter; aviation fuel is VND3,000/liter; diesel, FO oil, lubricant is VND2,000/liter; kerosene is VND1,000/liter; grease is VND2,000/kg).

According to the Ministry of Finance, the reduction of the environmental protection tax rate will contribute to restraining the increase in retail prices of gasoline in the country, thereby contributing to reducing the CPI index, repressing inflation and limiting the negative impact on the economy when gasoline prices are still high.

Since the environmental protection tax is one of the factors that affect retail prices of petrol and oil in the country, the reduction of the environmental protection tax rate will reduce the tax cost in the petrol retail price structure, thereby contributing to restraining the increase in domestic gasoline prices. Keeping the selling price of petrol and oil from rising too high, through the reduction of environmental protection tax rates on gasoline, oil and grease, will contribute to reducing the CPI, controlling inflation and limiting negative impacts on the economy.

According to calculations by the Ministry of Finance, with the expected consumption volume as in 2019 (the period before Covid-19), if the policy of reducing environmental protection tax rates on gasoline, oil and grease is applied as proposed, revenues from environmental protection tax will be decreased by VND46,064.4 billion and the total state revenue (including the value-added tax reduction) by about VND50,670 billion.