Prime Minister approved petrol tax changes

09:50 PM @ Tuesday - 22 March, 2016

Prime Minister Nguyen Tan Dung has approved calculation of petroleum import tax based on weighted average of the tariffs, taking into account Most Favoured Nation (MFN) status and Free Trade Agreement (FTA).

Previous calculation was based on only MFN tariff.

According to the Ministry of Finance, the new calculation would also cover the quarterly proportion of petroleum imports from countries which had signed for the FTA tariff. The data used to calculate the above-mentioned component would be collected through electronic customs systems by the General Department of Customs.

The new calculation would help keep a close watch on domestic businesses’ import of petroleum products from different sources while ensuring national energy security as also safeguarding the interests of businesses, consumers and the State as well, the ministry said in a statement on March 19.

The ministry agreed that there was a difference between current petrol tariff, calculated based on MFN status, and that from several ASEAN nations and the Republic of Korea.

Last week, local newspapers reported that consumers were made to pay around VND400 billion (US$17.7 million) a month on account of 5 percent to 10 percent tax difference in petroleum imports.

Petroleum products imported by Vietnam from ASEAN and the Republic of Korea were taxed at a rate of between 5 percent and 10 percent, or even zero, since the beginning of this year.

However, under the joint Circular No 78 promulgated by the Ministry of Industry and Trade and the Finance Ministry, the retail petrol prices have been calculated based on import tax of 20 percent for petrol products and 10 percent for diesel and mazut.

The calculation led to a tax difference of 5 to 10 percent for diesel and 10 percent for petroleum between imported petrol and retail prices.

Local petrol traders have been enjoying the benefit of this tax difference since May 2015 after the issuance of Circular No 78 for diesel imported from ASEAN and petrol imported from the Republic of Korea.

Diesel and mazut import taxes from ASEAN countries were cut from 20 percent to 10 percent since the beginning of this year in accordance with the ASEAN Trade in Goods Agreement (ATIGA).

In addition, under the Free Trade Agreement (FTA) with the Republic of Korea, signed in May 2015, Vietnam reduced the import tariff on gasoline from the Republic of Korea to 10 percent from the earlier 20 percent, effective December 20, 2015.

Economist Nguyen Minh Phong told giaoducvietnam newspaper that the wrong calculation of imported taxes could result in wrong calculations of VAT, corporate income tax and transport costs.

However, this had given rise to another problem. The wrong tax calculations raised basic petrol prices, special consumption tax and other fees, thus affecting consumers, Phong said.

To deal with the tax difference, the finance ministry on March 18 decided to revise the MNF import duty for several petroleum products from previous 10-13 percent to 7 percent.