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Alternative consensus
The Saigon Times Daily
Monday,  Apr 9, 2018,21:55 (GMT+7)

Alternative consensus

The Saigon Times Daily

A sharp hike in the environment tax on fuels is most likely as the Ministry of Finance says it will send the National Assembly Standing Committee next month a plan to this effect after gaining widespread support from relevant ministries and localities. Under the plan, petrol will have the most sizeable tax increase, from the current VND3,000 to VND4,000 per liter.

The ministry also asserts the tax hike would not adversely affect business and the country’s macroeconomic balance, as its calculation suggests that the higher fuel tax will spur the consumer price index (CPI) in July by a mere 0.27-0.29% over June and the average CPI this year by 0.11-0.15%. It also unveils its plan to apply the new tax from July 1, which will help the State budget to gain an extra revenue of nearly VND16 trillion, or roughly US$700 million a year.

Officials explain the Finance Ministry has received feedback from 14 ministries and agencies, 42 localities across the country, and four associations, all basically throwing their support behind the plan. Such an announcement explicitly shows a consensus has been achieved to raise the tax.

However, for weeks since the draft was put forth for feedback, many experts and the public have voiced their objection to the hike, saying taxes and fees on fuels, which make up some 40% of the retail price now, have been high, eroding business competitiveness and boosting living costs of people. Such voices seemingly are unheard. Furthermore, the ministry seems to lack candor when seeking to hike the environment tax, as the goal is apparently to raise State budget revenue now that the import tax revenue on fuels is falling due to tariffs being slashed in line with trade agreements with foreign countries.

Support or consensus from ministries and localities is understandable, as they are direct beneficiaries of the State budget, and higher revenues mean they are given more for their expenses. The consensus therefore is far from the widespread public approval.

If the Ministry of Finance wishes to achieve consensus in earnest, then subjects of their survey should not be limited to ministries and localities, and a few unnamed organizations. Such a tax hike plan should also get inputs from experts, business associations, transport firms, the general public, or at least independent consultancy groups or researchers.

Raising the environment tax on fuels is probably the easiest approach for the Ministry of Finance to replenish State coffers, but by picking the low-hanging fruit, the plan may do more harm than good in the long run. More dangerously, the alternative consensus may serve as a precedent for policymakers, as they may tend to take the more-travelled, easy path, which can hardly lead to sustainable development.

The Saigon Times Daily

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