The Ministry of Finance has just sent a dispatch requesting the Ministry of Justice to appraise the Government's draft decree on adjusting the MFN import tax rate for gasoline without lead additives.
According to the current regulations of the Law on Import and Export Taxes, three types of tax rates are applicable to imported goods, including special preferential tax rates which are applicable to countries that have signed the free trade agreement (FTA) with Vietnam. Preferential tax rates are applicable to countries implementing the most-favored-nation (MFN) treatment in trade relations with Vietnam and ordinary tax rates are applicable to the remaining countries.
Pursuant to Article 11 of the Law on Import Tax and Export Tax No. 107/2016, the Government has the authority to issue the preferential import tariff and the special preferential import tariff.
Based on the opinions of ministries, agencies and localities, the Ministry of Finance said that the adjustment of the MFN import tax rate for gasoline products may not have much impact on reducing gasoline prices because Vietnam is currently importing gasoline from ASEAN and Korea, but it will contribute to diversifying gasoline supplies from other countries such as China, the United States and countries in the Middle East and South America in case the supply in the world market fluctuates.
The adjustment of MFN import tax rates under this option still ensures that there is room to negotiate new FTAs in the future and ensures that Vietnam's obligations in international commitments will not arise.
As for leaded motor gasoline, there is currently almost no import turnover, and the country is no longer allowed to produce and use this item, so it is suggested to keep the same tax rate MFN as current.
For oil products, the Ministry of Finance submitted to the Government to continue applying the current MFN import tax rate of 7 percent.
Currently, the FTA import tax rate for oil in the framework of the ATIGA Agreement with ASEAN countries and the FTA Agreement with Korea has been reduced to zero percent, so the import turnover under the MFN import tax rate is insignificant.
According to the General Department of Customs’ data, the total import turnover with a tax on petroleum products of our country in 2021 is US$475.26 million, of which imports from countries that have signed FTA agreements with our country are $474.1 million accounting for 99.7 percent.
Moreover, the total import turnover with the tax on gasoline is $826.53 million in the first five months of 2022 and is mainly imported from countries that have signed FTA with the country.
Thus, it can be seen that the proportion of imported gasoline under the current MFN import tax rate is low; accordingly, in the event that other conditions remain unchanged, the reduction of the MFN import tax rate for gasoline products according to the plan, it will not have much impact on state budget revenue.
In case the adjustment of the import tax rate of MFN items to 10 percent according to the proposed plan leads to enterprises switching to importing these products from countries other than ASEAN, Korea, can increase state budget revenue.
However, the increase in state budget revenue depends on market developments and the ability to access supply, and the tendency of enterprises to shift imports to new markets.
