Will gasoline prices fall if the environmental tax is reduced?

According to the Ministry of Finance, lowering the environmental tax rate on gasoline, oil, and grease from April 1 to December 31 this year will result in a drop in state budget income (including environmental tax) of around 11,982 billion VND.

Many necessary goods, such as food, groceries, and gasoline, have seen price increases in recent years, despite the fact that many low-income people's "wallets" remain tight due to the pandemic, raising the risk of inflation. People's lives, as well as the economy, began to be affected. The Ministry of Finance recently filed with the National Assembly Standing Committee a draft resolution on environmental tax rates for gasoline, oil, and grease until December 31, 2022.

The Ministry of Finance proposed lowering the price of gasoline by 1,000 VND per liter to 3,000 VND per liter. Diesel, fuel oil, lubricants, and kerosene were all lowered by 500 VND/liter, while grease was reduced by 500 VND/kg. It is planned to maintain the present level of jet fuel, which is being cut to 1,500 VND/liter.

According to the Ministry of Finance, lowering the environmental tax rate on gasoline, oil, and grease from April 1 to December 31 this year will result in a drop in state budget income (including environmental tax) of around 11,982 billion VND. From January 1, 2023, the environmental tax rate for gasoline, oil, and grease will be in accordance with National Assembly Standing Committee Resolution No. 579/2018.

A variety of variables are expected to put upward pressure on the price level in March and the other months of 2022, according to information from the Ministry of Finance. In which the costs of many strategic goods and supplies, such as fuel, gas, construction materials, fertilizers, animal feed, and tourism services, are under significant pressure due to the global price trend and demand for investment and domestic consumption as the economy improves.

Based on market pricing changes in the first two months of the year and estimates for 2022, there are still considerable risks associated with achieving the year-end inflation target. As a result, "the Ministry of Finance will continue to be proactive and closely coordinate with ministries and local authorities to implement drastic measures on price management and administration, stabilizing market prices while actively monitoring supply and demand for important and essential commodities serving people's lives, particularly those that tend to increase in price, such as gasoline, gas, and construction materials."

In addition, the Ministry of Finance will closely monitor the prices of gasoline and oil, as well as the prices of the main raw materials used in domestic production, which are experiencing or are expected to experience high fluctuations in the global market, in order to take timely management and control measures to stabilize the market, particularly for petroleum products.

In response to the proposal to include business expenses in the base price of gasoline, the Ministry of Finance stated that it reviews, assesses, and adjusts costs in the petroleum industry on an annual basis using a thematic report on business expenses that is audited and sent to the Ministry of Finance (reporting period is March 31st of each year at the latest).

Dr. Vu Thi Hong Nhung, a senior lecturer at RMIT University Vietnam, believes 2022 will be a pivotal year for the country's economic recovery. As a result, lowering fuel prices by lowering environmental levies will have a favorable impact on company production, allowing enterprises to deliver products and services at an affordable cost. Petrol expenditures, on the other hand, represent 1.5 percent of total final household consumption.As a result, lower gasoline costs will assist in encouraging spending and boosting the economy's aggregate demand.

According to Dr. Vu Thi Hong Nhung, the Petroleum Price Stabilization Fund currently has little room to cut gasoline costs, so the only way to reduce gasoline prices is to reduce taxes and fees, with the environmental tax having the most room to be reduced. For the time being, a 1,000 VND reduction in the environmental tax will help to lower gasoline prices, offering maximum support to enterprises and people in the near future.