Tax percentage in petroleum prices lower than gerneral average says Ministry of Finance


From the beginning of 2021, crude oil prices on the world market have repeatedly seen unpredictable changes. Photo: Nguyen Thanh
From the beginning of 2021, crude oil prices on the world market have repeatedly seen unpredictable changes. Photo: Nguyen Thanh

The Ministry of Finance has sent a written document responding to the voters about the adjustment of taxes and fees to reduce petroleum prices, contributing to alleviating difficulties.

Which taxes are on petrol?

The Ministry of Finance received a proposal from the voters of Hanoi, which states that the Ministry of Finance is including high taxes and fees into the calculation of petroleum prices such as import tax 10%, VAT 10%, special consumption tax 10%, green tax VND3,800-4,000 per liter.

The four taxes account for 38% of petroleum prices. Other costs such as transportation costs, business norms, normative profits and stabilization funds account for 62%, increasing petroleum prices and CPI in the country.

“The Ministry of Finance is requested to study and adjust taxes and fees to reduce petroleum prices, contributing to alleviating difficulties for the people,” said a Phu Xuyen district voter.

The Ministry of Finance said from the beginning of 2021, crude oil prices on the world market have seen unpredictable changes with increasing and decreasing amplitudes.

It is forecast that petroleum prices will remain complicated, unpredictable and be influenced by many factors, especially measures to intervene in the supply of petroleum products of countries and political issues in some regions as well as the economic recovery of countries around the world after the Covid-19 pandemic, said the document.

Along with that, in the country, to minimize the impact of petroleum price fluctuations on the world market on domestic prices, the Inter-Ministry of Industry, Trade and Finance has effectively used the Price Stabilization Fund in compliance with regulations.

Accordingly, domestic petroleum prices have recorded a lower increase than those in the global market. Specifically, from the end of November 2021, the Inter-Ministry has made seven adjustments of petroleum prices to match the world’s price movements.

According to the Ministry of Finance, the taxes applying to petroleum products include import tax (for imports), value-added tax, special consumption tax (for gasoline) and green tax (no fees and charges for petroleum), in accordance with the international practices as well as Vietnam’s.

Compared with many countries in the world, the tax percentage in the petroleum prices in Vietnam is still lower than the general average. The tax percentage in the selling price in many countries mainly ranges from 45-60% (except for some countries with large oil reserves), while, in Vietnam, the tax percentage in petrol is about 38% and in oil about 20%.

In addition, the selling price of petroleum also includes transportation costs and normative profits, but these amounts only account for about 5-8% of the base price of petroleum products.

Specifically, the Ministry of Finance said regarding import tax, petroleum is currently imported from ASEAN countries and South Korea with the FTA import tax rate of 8% for petrol and 0% for oil, in line with international commitments.

Regarding VAT, the 0% VAT is applying to exported goods and services; the 5% tax rate for essential goods and services such as clean water and agricultural products and the 10% tax rate for all remaining taxable goods and services, including petroleum products.

Regarding excise tax, currently, only petrol products are subject to 10% excise tax Particularly, E5 biofuel has an 8% special consumption tax rate and E10 biofuel 7%. This is a low average compared to many countries.

Regarding green tax, the National Assembly Standing Committee has stipulated the green tax rate on petroleum products, specifically: petrol (except ethanol) is VND4,000 per liter; diesel, fuel oil and grease: VND2,000 per liter; jet fuel is VND3,000 per liter. For biofuel products such as gasoline E5, E10 – containing 5% – 10% ethanol, the green tax is taxed on the amount of fossil fuel based on biofuel structure.

Regarding transportation costs, business and profit norms, according to the Ministry of Finance, other costs that constitute the base price of petroleum products are specified in Decree 83/ 2014, Decree 95/2021 and Circular 104/2021. These costs are reviewed annually on the basis of reasonable actual expenses incurred at petrol and oil traders and business hubs. Accordingly, the Ministry of Finance will make a notice to revise to suit the reality. Currently, all normative costs included in the base price formula account for 5-8% of the current base price.

Petroleum prices are lower than the common level of many countries

According to the Ministry of Finance, in the management of domestic petroleum prices in recent years, the petroleum prices are being managed according to the market mechanism under the management of the State according to Decree 83/2014 and Decree 95/2021 of the Government. In order to effectively manage and use the Petroleum Price Stabilization Fund, the Ministry of Finance issued Circular 103/2021 guiding the method of setting aside spending, using and managing the fund.

The Petroleum Price Stabilization Fund has been used flexibly and effectively, helping the domestic petroleum be managed at appropriate levels without any sudden price fluctuations. In 2021, the fund will be used continuously to stabilize or limit price increases, thereby contributing to price stabilization and supporting life, production and business amid the complicated development of the pandemic.

According to the Ministry of Finance, by monitoring petroleum prices in some countries, our country’s petrol prices are currently lower than the common level of many countries in the region.

According to the data of the Global Petrol Prices dated January 31, 2022, petroleum prices of China are VND26,611 per liter, Laos VND30,665 per liter and Cambodia VND26,184 per liter.

In Vietnam, the selling price of E5 Ron92 in the domestic market on February 7, 2022 was VND23,590 per liter and Ron95 VND24,360 per liter, significantly lower than the average gasoline price of regional countries in as well as the world average (VND28,062 per liter).

Under the direction of the Government, the Ministry of Finance has actively researched and proposed policies and solutions to support taxes, fees and land rent. In particular, under Resolution 43/2022/QH15, the VAT rate is reduced by 2% in 2022 for groups of goods and services that are subject to 10% VAT rate, except for some groups of goods and services subject to special consumption tax.

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Regarding the tax policy for petroleum products, the Ministry of Finance will continue to work with relevant ministries and agencies to closely monitor petrol price movements in the domestic and world markets to consider and advise competent authorities on appropriate solutions.


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