Gasoline Prices Inflexibly Regulated

Dr Ngo Tri Long said that the Ministry of Finance’s gasoline price regulating mechanism remains very rigid, there is no benefit sharing with consumers, and tax policy are slowly responsive and consistent with market developments. The ministry’s explanations are unconvincing.

 

Mr Long stressed that in the context of international economic integration, the most important administrative instruments are tax, fee and price.

 

In administering essential commodities in general and petroleum products in particular, the authorities must be flexible, responsive, and clear-headed to these three tools. When prices increase or decrease, regulators should change taxes and charges. Specifically, in the current context of high prices, the Government should reduce taxes to keep prices relatively reasonable and stable to existing incomes of citizens and make inputs costs more reasonable for enterprises; thus, enhancing their competitiveness.

 

Currently, low-growing economy, massive inventories, high input costs and high interest rates notwithstanding recent giant cuts are hurting us. Meanwhile, citizens’ incomes seem to be shrinking in the wake of soaring prices. To remove these, tax options should be taken into account.

 

I do not agree with the interpretation by officials from the Price Management Department when they said that Vietnam's petroleum import duty rates were still lower than specified. Their explanations were rather quibbling and unconvincing to businesses and consumers because administering an economy, especially with market mechanism, must be very flexible, not rigid or mechanic.

 

If economic conditions are stable enough, we can apply model patterns but when the economy is facing hardships, we must be elastic. The Ministry of Finance should not take a sample or model as a fixed reference for making policies or give an excuse for not lowering taxes.

 

The State is a decision-maker; thus, it must guarantee the benefit sharing among the State, enterprises and consumers. Accordingly, enterprises accept to take less profit, consumers accept to pay more caused by world price increase, and the State accepts to receive less import tax, VAT and excise tax. According to the laws, VAT and excise tax or special consumption tax are set by the lawmaking National Assembly and any changes to them must be ratified by the National Assembly while import tariffs are adjusted by the Ministry of Finance.

 

Gasoline prices have increased several times in the past month but the State still retains taxes. This shows that the State does not share with citizens. The State still contends for gains and places the burden on consumers and businesses using petroleum. Thus, citizens will have to pay more. Besides, the price stabilisation fund should take the toll reasonably: The State only collects when global prices are low, not when they are high because the fee will be added to selling prices.

 

This explanation is unreasonable because the pricing mechanism specified by the Decree 84 is a “hermaphroditic” mechanism as opposed to market mechanism principles. Empowering traders to set prices is wrong because all businesses always look for ways to earn profits through prices. Therefore, this monopolistic pricing empowerment is contrary to the Price Law.

 

On the other hand the, Ministry of Finance provides that each price change cannot exceed 7 percent from the current price. For businesses, they only need to split price changes to be legal. The explanation by the Ministry of Finance is quibbling when it says that they share interests. But, the reality must be decided by financial auditors. Only they can have enough capability to say whether the prices are reasonable or not. Information from wholesale traders is one-sided while authorities are incapable of appraising prices. They mostly listen to information from businesses and follow their requests.

 

Excise tax and VAT are decided by the National Assembly and the Ministry of Finance has no right to interfere. Excise tax is applied to discouraged luxury goods to like cars, cell phones, cigarettes and alcohol. Tax is a main source of income for the State and petroleum industry is a big payer. It even feeds the entire economy.

 

We impose excise duty on petroleum because of its huge impacts on the environment and we collect VND1,000 per litre sold. In the current context, it is not wise at all for the Ministry of Finance to propose a cut or abolition of excise tax.

 

In administering petroleum prices, the Ministry of Finance needs to base on the principles of feeding and collecting revenues.

 

The Ministry of Finance has not lowered the import tax is not paying attention to raising revenues, but the make business activities more difficult, more losses. That the ministry has not yet lowered import tariffs is a way of not nurturing the source of income. Their inactivity causes more difficulties for enterprises which will then pay less to the State. As a result, the loss is greater than the gain.

 

Incomes from petroleum products are gigantic. At present, nearly 40 percent of retail prices are constituted from taxes and fees. This year, the State loses a lot from tax exemptions, reductions and deferrals; thus, it may have to rely on this source. However, given hardships facing citizens and businesses, a reduction in import duty is insignificant.