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Environmental tax hike must be rolled out transparently

Update: October, 02/2018 - 08:00
The increase in the prices of diesel and petrol will not affect the price index in the country, nor the general public’s consumption or the country’s growth rate due the decreases in quite a few tax categories which are levied on imported goods. — Photo kinhtedothi.vn

Đinh Tuấn Minh, an economic expert from the Institute for Policy Research and Technology, speaks to the newspaper Kinh tế& Đô thị (Economic and Urban Affairs) on the need for transparency and accountability in the decision to raise the environmental tax on diesel and petrol

How do you respond to the National Assembly Standing Committee’s decision to increase the environmental tax on diesel and petrol?

Generally speaking, our annual State budget collection has increased year on year. However, what people worry about is that the increase in our state budget collection is smaller than the increases in our spending.

Đinh Tuấn Minh

I still remember that the previous tax increase on diesel and petrol from VNĐ1,000 to VNĐ3,000 (US$0.05-0.15) per litre some years ago did help considerably improve the State budget collection. I’m pretty sure that the increase in the environmental tax on diesel and petrol to VNĐ 4,000 ($0.2) per litre in 2019 will help to increase our State budget collection. It is expected that the amount of tax collection from selling diesel and petro will be over VNĐ55,000 billion per annum – an increase of about VNĐ14,368 billion per annum compared with the old diesel and petrol prices.

According to the Government’s point of view, the increase in the prices of diesel and petrol will not affect the price index in the country, nor the general public’s consumption or the country’s growth rate due the decreases in quite a few tax categories which are levied on imported goods.

A key reason the National Assembly Standing Committee decided to increase the taxes levied on diesel and petrol is that it will help the State increase its budget collection and will not have a serious impact on the country’s inflation rate.

In my opinion, Vietnamese people are on the side of the Government as the money collected from the environmental tax, which is levied on diesel and petrol, is used to protect the environment so that the people can live in a cleaner environment.

Many people have raised concerns that the hike in the prices of diesel and petrol will have big negative impacts on the general public and the competitiveness of the enterprises. What do you think?

According to the Government, Việt Nam’s CPI in 2019 will be about 4-5 percent. So if the environmental tax levied on diesel and petrol will come into effect on the first day of 2019, it will not have a big impact on the country’s CPI (Consumer Price Index) in 2019, as it will account for just about 0.07- 0.09 percent.

Though the Government has confirmed that the increase in the environmental tax will not have big impacts on the nation’s inflation rate, there is an expectation that somehow it will have negative impacts on vulnerable groups in society. In other words, low-income people will be affected.

In my opinion, diesel and petrol are the inputs in almost all economic sectors in our society including the people’s everyday life. That’s why the Government should conduct an overall evaluation on the impact of the increase of the environmental tax on diesel and petrol on the society in general.

In your opinion, what should the Ministry of Finance do to restructure the budget collection to ensure there is sufficient budget for the Government to operate?

In my opinion, the environmental tax has been established as the revenue from oil and gas is among the biggest revenue sources for the State budget besides fossil coal and nylon bags. That’s why, in my opinion, fossil coal and nylon bags should also be more highly taxed.

As we all know, the restructuring of the State budget is a big issue. If the revenue is decreased, we have to look for various ways to raise the State revenue by looking for new income sources which are feasible and workable in accordance with international norms and practices. But, in my opinion, the first thing we should do now is to make sure all public spending follows the State budget law and other legal documents.

Don’t you think that we should have a road map to increase the environmental tax levied on petrol and diesel?

I can’t agree more.

The Ministry of Finance should write a report on how the revenue from the environmental tax collection from petrol and diesel has been collected and used and then submit it to the Government. Of course, the report must ensure transparency and accountability.

In my opinion, we should encourage people and organisations to use other types of energy which are friendly to the environment, like ethanol diesel or others, in their daily activities.

It is unavoidable that the increase in the environmental tax will lift inflation. What should the Government do to address this?

In my opinion, the first thing the Government should do is to control the price index of common commodities like food, electricity and others. As we all know, food and foodstuffs account for one third of the CPI basket of commodities. In the first eight months of this year, the price of food and foodstuffs already increased by 2.3 per cent. Meanwhile, the Government asked the Việt Nam Electric Corporation not to increase the electricity tariff in 2018 nor the fees levied on public services.

In other words, to keep the inflation rate under control, the Government has done its best to co-ordinate the financial policies with other micro policies. In the meantime, the Government has made a big push to restructure the national economy and to switch the country’s growth model from one based on breadth to one based on depth—to be based on high technology, high labour productivity, modern management skills and high value added export products.— VNS

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