Proposal on increasing E5 import tax sevenfold

The Ministry of Finance has issued a document asking for opinions of relating ministries, associations on increasing E5 import tax. Prior to that, at the end of 2014, the Ministry of Finance has received proposals to increase E5 import tax from Binh Son Refining and Petrochemical Company Limited (BSR).

According to BSR, E5 and RON92’s import taxes are 5% and 35% respectively. Domestic companies are currently buying 95% RON 92 and 5% ethanol to manufacture E5 biofuel, which makes the cost of the procedure higher than just import it. BSR stated that the current tax policies encourage importing E5, not producing it, so E5 sales will face difficulties in the future. Therefore, the company proposed to the Ministry of Finance to consider the increase of E5 import tax to support and encourage domestic businesses that produce E5 biofuel.

The Ministry of Finance acknowledged that there is currently no business in Vietnam that imports E5 due to its characteristic of easily evaporated and hydrated, which makes sea transport highly unlike. All E5 in the country is produced locally.

According to calculations, E5’s base price is currently 17.090VND/liter – 3.701VND/liter higher compared to E5’s base price and 816 VND higher compared to E5’s price if it is imported directly.

Under the provisions of the current import tax, import taxes of E5’s materials are 5% higher than import tax of E5 itself. Therefore, to conform the principle of “import tax of materials must be lower than import tax of finished product”, E5’s import tax must be at least 35%. Therefore, to encourage domestic production of E5, the Ministry of Finance should organize a plan to increase E5’s (and E10’s) import tax to 35%. With this option, calculated base price of imported E5 will be 16.359VND/liter, 711VND lower compared to locally produced E5.

Currently BSR is selling E5 at international RON 92’s price minus 350VND/liter (equivalent to 14.205VND/liter). According to the Ministry of Finance, difference between base price of imported E5 and E5 locally produced by BSR is 2.174VND.

Therefore, to encourage the production of E5 as directed by the government under Notification 481/TB_VPCP issued on December 31^st, 2014 (which included the conclusion of the Deputy Prime Minister Hoang Trung Hai at the meetings to set price mechanism of biofuels E5), the Ministry of Finance is also studying measures to apply environmental tax accordingly.

 

 

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