illustrative photo
From January 1, 2016 the petrol import tax on South Korea was lowered to 10% in accordance with the trade agreement between the two countries. As a result, the amount of imported fuel from South Korea increased sharply.
Statistics from the General Department of Customs show that in 2016, Vietnam imported USD1.25bn of fuel of which 75% were from South Korea. In the first nine months of 2017, this number rose to 97%.
The General Department of Customs proposed to lower the taxes for other ASEAN countries to 12% to create more healthy competition and better revenues for the state budget. The 20% tax is largely regarded as meaningless as few companies import from these markets. The revenues from petrol recorded by the General Department of Customs dropped by VND10trn (USD440m) last year.
However, the Department of Tax Policy under the Ministry of Finance disagreed, saying that the state budget revenues would actually decrease. Moreover, they want to maintain a 20% tax rate to encourage firms to buy fuel from Dung Quat and Nghi Son refinery plants.
Several experts worried that Vietnamese firms may be forced to buy fuel at higher than average prices.
Phan The Rue, president of Vietnam Petroleum Association, said thanks to low taxes, import firms would still earn good profits even if they have to buy petrol at higher prices than normal. However, it was not easy to get the certificate of origin from South Korea to enjoy the 10% tax.
The certificate is issued by South Korean authorities. "Small and new firms who don't know their way around the markets or their partners may have to offer bribes to be given the certificates and enjoy the tax cut," he said.
There is also concern about firms faking the certificate to profit from lower tax payments. Paying high prices for the certificate is still profitable than paying 20% tax over the long term.
"The state budget will suffer greatly," Rue claimed.