Environment Tax Law May Raise Production Costs in Vietnam

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Mar. 22 – A draft of the new Environmental Tax Law, set to be approved in October this year, may increase taxes on fuel and coal and hike production costs in Vietnam.

The law will likewise tax mosquito repellents, plastic bags, fruit and vegetable preservatives, and products containing hydro-chlorofluorocarbons. If the law is approved, beginning January 1, 2012 an enterprise or individual who exploits, produces or imports groups of products mentioned above and classified as hazardous to the environment will be charged an environment tax.

The environment tax for each liter of fuel will range from VND500 to VND2,000 and between VND6,000 and VND30,000 for each ton of coal. Plastic bags will be taxed between VND20,000 and VND30,000 per kilogram and fruit and vegetable preservatives will be taxed from VND1,000 to VND5,000 says the Ministry of Natural Resources and the Environment.

“The environment tax will help raise more funds for the government’s budget,” National Assembly Vice Chairman Uong Chu Luu told Thanh Nien News. “But the products subject to the tax are materials for production. Prices are high already, so it would be hard for producers to maintain their business and keep prices competitive if input costs continue to rise.”

The new tax will help generate more revenue for the government from VND14.3 trillion to as much as VND57 trillion, depending on the tax rates adopted. Vietnam is anticipating increased environment degradation as its economy expands. The country currently does not place an environment tax on businesses, but it has been spending VND4 trillion for environment protection activities and VND18 trillion on pollution treatment annually.