tiểu luận thuế và htt ở vn fundamentals and practice of vietnam’s law on environmental protection tax

Goods provided for in Article 3 of this Law shall not be subject to environmental tax in the following cases: a Goods transported in transit or transshipped through the border gate, Viet

According to environmental protection law no 57/2010/QH12, the law provides fortaxable subject, un-taxable subject, taxpayers, tax base, tax declaration, tax calculation,tax payment and environmental protection tax refund.

1.2 Objectives

1.2.1 Taxable subject

There are 9 groups of taxable subjects which is specified by government

a) Gasoline, oil, grease, including: gasoline, except ethanol; aircraft fuel; diesel oil; petroleum; fuel oil; lubricants; grease

b) Coal, including: lignite; anthracite Coal (anthracite); fat coal; other coal

c) Hydrogen-chlorofluorocarbon liquid (HCFC)

d) Taxable-plastic bag

c) Herbicide which is restricted from use

d) Pesticide which is restricted from use

e) Forest product preservative which is restricted from use

f) Warehouse disinfectant which is restricted from use

g) When it is necessary to supplement other taxable objects as per period, the

National Assembly Standing Committee shall consider and regulate

1.2.2 Non-taxable subject

Goods is not specified in Article 3 (taxable subject) of this Law shall not be subject

to environmental tax

Goods provided for in Article 3 of this Law shall not be subject to environmental tax

in the following cases:

a) Goods transported in transit or transshipped through the border gate, Vietnam border

in accordance with the law, including the transportation of goods from exporting countries toimporting countries through the border gate of Vietnam but it is not made import & exportprocedures into and out of Vietnam; transit goods through the border gate, the border ofVietnam on the basis of agreements signed between the Government of Vietnam and aforeign government or an agreement between agencies, representative authorized under theprovisions of law by government of Vietnam and foreign governments;

b) Goods temporarily imported for re-export within the time limit prescribed by law;c) Goods directly exported by production facilities or entrusted for the exportbusiness to export, except for organizations, households and individuals to purchasegoods which environmental protection taxable subject to export

1.2.3 Taxpayers

- Environmental protection taxpayer is organizations, households and individuals

producing, importing goods under taxable subject provided for in Article 3 of this Law

- Environmental protection taxpayer in some specific cases shall be provided for as follows:a) in case of goods importing commission, the person who entrusted importing goods shall be taxpayer;

b) In cases where organizations, households and individuals act procurement hub ofcoal to develop small, retail but they can not produce the documents proving thatgoods have been paying environmental protection tax, the organizations, householdsindividuals act as procurement hub shall be taxpayer.

1.3 Tax base

- Tax base of environmental protection is the number of taxable goods and absolute rate

- The number of taxable goods shall be provided for as follows:

a) For goods produced in the country, the number of taxable goods is the quantity of goods produced and sold, exchanged, internally consumed, donated;

b) For imported goods, the number of taxable goods is the quantity of imported goods

- Absolute rate for tax calculation specified in Article 8 (regulated tariff table) of this Law

1.4 Tax calculation method

The amount of environmental protection tax payable = the quantity of unit of dutiable goods x absolute rate specified on a unit of goods

To calculate the payable tax amount, the quantity of the taxable goods unit and the absolute tax rate set by the government shall be calculated Specifically:

- Quantity of taxable goods units is determined as follows:

+ Domestically produced goods: The quantity of taxable goods is the quantity ofmanufactured goods exchanged, exchanged, internal consumed, donated, promoted andadvertised

+ Imported goods: The quantity of taxable goods is the quantity of imported goods

+ Goods being mixed fuels containing petrol and oil, etc The number of taxable goods inthe period is the quantity of fossil-based petrol, oil and grease included in the volume ofmixed fuels imported or produced, sold or given exchanged, donated or put into internalconsumption, which are converted into units of measurement and tax calculationregulations of the corresponding goods The method of determination is as follows:

Quantity of fossil-based petrol, oil and grease calculated tax = Quantity of imported fuel,imported, sold, consumed, exchanged or donated x Percentage of fossil-based gasoline,oil, grease found in mixed fuels

+ For multi-layer plastic bags manufactured or processed from single plastic HDPE,LDPE, LLDPE and other plastic films (PP, PA, ) or other substances such as aluminum,paper Environmental protection is determined by the percentage of weight of singleplastic film HDPE, LDPE, LLDPE contained in multi-layer plastic bags

- Absolute tax rate per unit of goods

According to Clause 1, Article 1 of Resolution 579/2018 / UBTVQH14, the

absolute tax rate for 1 unit of goods is set by the State for each type of goods as follows:

Table 1.1 Environmental protection tax schedule

(VND/unit)

2 Flying fuel liter 3.000

III Hydro-chloro-fluoro-carbon (HCFC) solution, kilogram 5.000including HCFC, contained in a mixture

containing HCFC solution

IV Taxable Plastic bags kilogram 50.000

VII Forest preservatives are of limited use kilogram 1.000

VIII Warehouse disinfectants are of limited use kilogram 1.000

1.5 Tax declaration, tax calculation and tax refund

- The tax declaration, tax calculation, tax payment for environmental protection on goodsproduced and sold, exchanged, internally consumed, donated shall be made by the monthand the provisions of the law on tax administration

- The tax declaration, tax calculation, tax payment for environmental protection on importedgoods shall be made at the same to time of import tax declaration and tax payment

- Environmental protection tax is only paid once for goods produced or imported

In addition, Article 11 regulates about the tax refund

Environmental protection taxpayer is paid tax refund in the following cases:

- Imported goods are still stored in warehouse, storage at the border gate and are subject

to be supervised by the customs authority for re-export to foreign countries;

- Imported goods to transport, sell abroad through agents in Vietnam; gasoline, petrol soldfor vehicles of foreign firms on the route through Vietnam's ports or means of Vietnam'stransportation on international transport road under the provisions of law;

- Goods temporarily imported for export by business mode of temporary import for export;

re Goods imported by the importer rere exporting to foreign countries;

- Goods temporarily imported for participation in fairs, exhibitions and introduction of products in accordance with the law when re-exported to foreign countries

2 Impact of Environmental Protection Tax

2.1 Economy

Environmental Protection Tax (EPT) is applicable to the production and importation

of certain goods which are considered as detrimental to the environment, the most

significant of which are petroleum and coal

2.1.1 Demand side (Tax collector)

Without government intervention, there is no market incentive for companies andindividuals to take into account environmental damage, because its impact is spreadacross many people and it has little or no direct impact on whom made environmentalcontamination Therefore, protection of the environment requires collective action, led bytaxation system of government In other words, government is tax collector, who indicatesthe demand side of Environmental Protection Tax

Environmental taxes have many important effects, such as the ability to raisepublic revenue and economic efficiency

2.1.1.1 Revenue from Environmental Protection Tax

2.1.1.1.1 Environmental Protection Tax Hikes

On 20/09/2018, the National Assembly's Standing Committee passed a resolutionwhich raises the EPT on some main types of goods and will take effect from January 1, 2019

Table 1.1 Effects of Environmental Protection Tax Hikes

7 Restricted use chemicals kg 500 - 1,000 500 - 1,000 0

( Excludes plastic bags used for packaging or which are “environmentally friendly”

(Source: Resolution 579/2018/UBTVQH14 promulgating environmental taxes, taken effect on 01/01/2019)

2.1.1.1.2 Reduction of importation

Petroleum products have become a major revenue source of Vietnam with proceeds from import duty on petrol and oil now accounting for around 7% of the

government income Statistics released by the General Department of Customsshowed that in the first 8 months of 2018, oil and petroleum product importsreached 8.63 million tons, while the import value stood at USD 5.74 billion, anincrease of 27.3% over the same period of 2017.

However, this revenue source is now on the decrease because import dutyrates on petrol products have decreased considerably over the last few years due tothe country’s tariff commitments Vietnam is now offering the most-favored-nationimport duty rates to all WTO members under which the maximum duty rateapplicable to petrol is 40% Particularly for exporters from ASEAN countries,since 2012, the preferential import duty rates of petrol, jet fuel, kerosene, diesel oil,and fuel oil have been 20%, 10%, 7%, 5%, and 0%, respectively Meanwhile,exporters from the Republic of Korea have enjoyed the preferential duty rate of10% for petrol and 5% for oil since 2016 These preferential tariffs will begradually reduced to 0%

As reported by the Financial Times online, the proceeds from import duty

on petroleum products have sharply reduced from VND 53 trillion (USD 2.3billion) in 2015 to VND 14.1 trillion (USD 613 million) in 2017 It is estimatedthat the tax increase would annually bring about more than VND 15.7 trillion(USD 672 million) to the government coffers

Against the backdrop of the decrease in revenue from import duty, the environmental tax will undoubtedly need to go up to balance the government budget In other words, EPT will be used to compensate for the reduction in import-export taxes.

2.1.1.2 Economic Efficiency of Environmental Protection Tax

2.1.1.2.1 Low expenditure on environmental protection

The concern of economic efficiency is how environmental tax revenues will

be spent According to Dr Dinh Tuan Minh, an economic expert, speaks to the

Nông thôn ngày nay (Countryside Today) newspaper: “The nature of the environmental protection tax in Vietnam is not a sum of money to be used in a

specific purpose or a special economic field The collected money will be put intothe government budget Of course, a small sum will be disbursed in environmentalprotection In other words, the environmental tax will be used to compensate forthe reduction in import-export taxes.”

He also said: “When we want to increase the government budget throughincreases in environmental protection tax, it is likely that the environmentalmessage might be misunderstood A key problem here is that the collected money

is not predominantly used for the environment, but for many other activities In itsreport, the Ministry of Finance (MOF) didn’t explain how the environmental taxwould be used.”

Dr Le Thi Thuy Van, head of the Department of Science Management andInternational Cooperation, Financial Strategy and Policy Institute under the umbrella

of the MOF, said annual government budget allocations for environmental activitiesamounted to more than 1% of total expenditures in the government budgetexpenditure estimate "The total government budget for environmental protectiontasks in the 2013-2018 period is VND 72.42 trillion Of which, the central budget isVND 10 trillion, and the local budget is VND 62.42 trillion," Van said

National Assembly Chairwoman Nguyen Thi Kim Ngan said all proceedsfrom the collection of environmental tax should be remitted into the governmentbudget and used for environmental protection work “That way, people will seethat the money is not spent for other purposes,” she said.

However, Vietnam gained VND 42.4 trillion (USD 1.84 billion) in revenuefrom the EPT in 2016, jumping nearly 57% from 2015 During the same period,spending on environmental protection reached just VND 12.3 trillion, making up29% of the tax revenue

2.1.1.2.2 Modest results from environmental protection

The government has used central and local budgets as well as officialdevelopment assistance resources to invest in programs and projects related togreen growth Green growth is a way to achieve economic development whilepreserving the environment, preventing the loss of biodiversity and minimizing theunsustainable use of natural resources, according to the Organization for Economicand Cooperation Development According to data from MOF, the Governmentspent VND 930 billion executing the National Target Program on EnergyEfficiency and Conservation in the 2012-2015 period; VND 49.32 trillion on theForest Protection and Development Plan in the 2011-2020 period; VND 5.86quadrillion on the National Target Program to overcome pollution and improve theenvironment in the 2013-2015 period; and VND 1.77 trillion on executing theNational Target Program on climate change

However, Dr Le Thi Thuy Van acknowledged that budget spending amongsome budget-using units was scattered, ineffective and misused for other purposes,such as the allocation of environmental investigative tasks and surveys Besides this,

Vietnam has not paid much attention to the allocation of funds for theimprovement of the criteria and technical standards on environmental protection.

Meanwhile, private-sector investment in environmental protection is low, sothe government budget is still the main source of funding In some localitiessubject to budget constraints, the relevant parties still propose the centralGovernment supplement the budget for environmental pollution treatment

The solution of MOF here is restructuring government budget expenditure inthe direction of green finance to ensure the performance of economic and socialdevelopment tasks is one of the important tasks of the Financial Strategy up to 2020

The tax must be credible and its rate predictable in order to motivate environmental improvements Economic efficiency requires transparency and management ability of government.

2.1.2 Supply side (Taxpayers)

2.1.2.1 Individuals/Households

There is concern over the negative effects of this tax Household consumptionaccounts for over two-thirds of total GDP Higher taxes and reduced subsidies forgovernment-controlled goods such as healthcare services, electricity, among others, willput a certain burden on individual expenditures

Tax levied on diesel/petrol is calculated per head as almost everyone uses it in theirdaily travel by one means of transport or another The additional $690 million to thegovernment budget per annum actually came from the pockets of all 3 subjects of EPT.This hike in the petrol tax is just like the hike in the electricity tariff in late 2017

Chairman of the Hanoi Supermarket Association Vu Vinh Phu said “the increase ofenvironmental tax on petrol and oil will push up transport freights and as a result the prices ofessential commodities will rise “The burden will finally fall on consumers,” he added.

It is indisputable that tax levied on diesel/petrol is kind of a tax levied on all dailyessential goods Undoubtedly, the increase in the diesel/petrol price will push marketprices up Higher prices do harm to individuals, especially to whom have income belowthe poverty line In other words, poverty population suffer the heavy burden of higherprices, or the hardest hit will be poor people This is a common theory applied to allessential goods in society

2.1.2.2 Enterprises

According to Dan Tri newspaper regarding the decision to raise the EPT, senioreconomist Le Dang Doanh said such a tax hike will lead to an increase in transportcharges as well as the production costs of all products and services, thus loweringenterprises’ competitiveness and contributing to a rise in inflation

In particular, the increase in the EPT for one litre of petrol by VND 1,000 (due toResolution 579/2018/UBTVQH14) will make consumption prices of all market items rise.However, the hardest-hit sector will be the transport sector To compensate for that,transport enterprises will increase their fares and service charges This is an unavoidableconsequence

2.2 Environment

The tax rate should be commensurate with the environmental damage