The Ministry of Finance has just submitted to the Government a draft Resolution on environmental protection tax on jet fuel till the end of December 31, 2020.
The Ministry of Finance has reported a steady increase in the budget revenue from environmental protection tax: about 11,676 billion VND in 2012; 11,849 billion VND in 2013; 12,087 billion VND in 2014; 27,020 billion VND in 2015; 43,142 billion VND in 2016; 44,825 billion VND in 2017, 47,050 billion VND in 2018 and 63,079 billion VND in 2019.
The ratio of the tax collection to total state budget revenue has increased from over 1% to over 4%. Average revenue of environmental protection tax on jet fuel between 2015 and 2019 was about 2,939 billion VND per year.
In December 2019, the COVID-19 pandemic broke out in China. This quickly spread to other countries around the world and perpetuated itself until now. Many industries were severely affected, especially aviation industry due to travel restrictions as well as disrupted production and business activities.
In order to help reduce difficulties for the aviation industry in general and aviation enterprises in particular when facing the aftermaths of the COVID-19 pandemic, the Ministry of Finance proposed that the National Assembly Standing Committee reduce the environmental protection tax on jet fuel to 2,100 VND/ liter (which is equivalent to 70% of the environmental protection tax on current fuels according to the provisions of Resolution No. 579/2018 / UBTVQH 14 of September 26, 2018 on environmental taxes).
This tax rate is expected to be in effect until the end of 2020, from January 1, 2021 onwards, the tax rate will be applied in accordance with Resolution No. 579.
According to an analysis by the Ministry of Finance, the environmental protection tax is an indirect tax on products and goods that cause negative impacts on the environment when being used, therefore, the environmental protection tax will be transferred to production costs and consumers are final taxpayers.
Therefore, due to the reduction of environmental protection tax on jet fuel from VND 3,000 / liter to VND 2,100 / liter by the end of December 31, 2020, jet fuel prices do not include the corresponding value-added tax reduction of 900 VND / liter and jet fuel price would be 900 VND/ liter respectively.
Regarding the difficult situation of aviation enterprises during current period, besides other solutions, the adjustment of tax (including tax exemption and reduction) is also a measure for the Government to support and reduce financial burden for aviation businesses, thus helping aviation industry maintain its business operations and reducing the costs of aviation services. This thereby stimulates the demand for aviation, which contributes to the recovery of aviation industry from the crisis caused by the COVID-19 pandemic. A number of countries around the world have also applied these methods, including taxes on jet fuel to support businesses against the COVID-19 pandemic.
The exemption of environmental protection tax will contribute to reduced flight costs and indirectly creates financial sources for businesses to operate, thereby maintaining and developing businesses as well as increasing demands for labour and minimizing labour reduction. In the long run, as aviation industry has overcome the crisis and developed, the number of aviation employees is likely increase. However, the specific impact on the number of jobs in this industry depends on the recovery and development of aviation industry, which are based on many other factors such as technology, business administration techniques…
Regarding the national budget, the reduction of environmental protection tax on jet fuel means that the value-added tax on jet fuel also decreases by 10% (90 VND / liter), reducing the environmental protection tax revenue by 72-80 billion VND / month.
When it comes to the society, the reduction of environmental protection tax will contribute to reduced flight costs, which indirectly creates financial resources for businesses, contributes to the maintenance and development of enterprises, increases labor demand and curbing labor cutting issue.