10:47 | 19/04/2016 Finance - Banking
(VEN) - The Ministry of Finance (MoF) recently adjusted petroleum import taxes in order to address the recent differences between MFN (Most Favored Nation) tariffs and special tax preferences for petroleum imports.
Vietnamese businesses have to pay considerable transportation costs when importing petroleum
According to Luu Duc Huy, Deputy Director of the MoF’s Tax Policy Department, so far Vietnam has signed 11 free trade agreements (FTAs). Implementing its commitments in these FTAs, Vietnam has gradually reduced special tax preferences for petroleum imports. However, these FTAs were signed at different points of time, so the roadmaps for tax reduction are different. Under some agreements, petroleum is included in the exclusive list with no tax reduction required, but under other agreements, Vietnam has cut taxes to apply special preferences to petroleum imports. “Therefore, the gap between MFN tariffs and special tax preferences for petroleum imports is unavoidable,” Huy said.
In order to reduce this gap, the MoF issued Circular 48/2016/TT-BTC stipulating preferential import tax rates applied to petroleum. Specifically, petrol imports continue to be subject to the current 20 percent tax rate because the special preferential import tax rate applied to petrol is 20 percent under the ASEAN Trade in Goods Agreement, the MoF explained. Only petrol imports from the Republic of Korea are subject to a tax rate of 10 percent under the FTA Vietnam signed with this country. The tax rate applied to diesel oil, kerosene, fuel oil, and aviation fuel imports has been reduced from 10 and 13 percent to seven percent.
These preferential import tax rates applied to petrol and oil are expected to ensure the interests of consumers, businesses, and the state.
People think these preferential import tax rates will bring big profits to petroleum businesses. However, Vietnam imports petrol and oil from not only countries that have signed FTAs with it but also others, and these special tax preferences are not applied to 100 percent of imported goods, the MoF explained. Moreover, transportation and insurance costs account for about six or seven percent of the price of petroleum imports from Singapore and the Republic of Korea.
The MoF has coordinated with the Ministry of Industry and Trade to report to the prime minister the method of calculating petroleum import taxes based on the weighted average of MFN and FTA tariffs. The prime minister has accepted this method. Statistics on petroleum imports from countries that have signed FTAs with Vietnam are made on a quarterly basis by the General Department of Vietnam Customs via the electronic customs system. Based on the statistics for each quarter, management authorities will propose the average tariff for the next quarter.
The use of weighted average import tariffs helps ensure national energy security as well as the interests of consumers, businesses, and the state.