Environment tax will lead to price hikes, legislators warn

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National Assembly representatives say that a new environment tax on several products, including fuel and coal, may cause production costs and consumer prices to surge.

According to a bill discussed by legislators for the first time Monday, fuel is one of five products that will be taxed under the Environmental Tax Law, expected to take effect on January 1, 2012. Other products are coal, plastic bags, fruit and vegetable pesticides, and hydrochlorofluorocarbons (HCFC), often used in fridges and air conditioners.

Phung Quoc Hien, chairman of the NA Finance and Budget Committee, said the maximum rate of VND4,000 per liter on gasoline products is high.

The taxes, accounting for up to 25 percent of retail prices, will result in higher prices for many products and services, Hien said.

"The environment tax will help raise more funds for the government's budget," said NA Vice Chairman Uong Chu Luu.

"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."

Truong Thi Mai, chairwoman of the Social Affairs Committee, said the new tax on pesticides will raise input costs for rice production by around 12 percent and such an impact needs to be considered.

According to the Ministry of Finance, the new environment tax will translate to annual revenue of between VND14.3 trillion and VND57 trillion, depending on which tax rates are applied.

Finance Minister Vu Van Ninh said pollution will be 3-5 times higher if the country's gross domestic product doubles. Vietnam doesn't have any environment tax at present while it has to spend VND4 trillion on environment protection activities and VND18 trillion on pollution treatment at industrial parks and craft villages every year. ses and h said ce,.

The NA Standing Committee on Monday agreed to delay the introduction of a new housing tax, saying the economy is not really stable now and such a tax will have certain negative impacts on residents.

According to a proposal by the Finance Ministry, local homeowners would have to pay an annual house tax of 0.03 percent of the assessed home value, which is based on total construction costs. Houses built for VND500 million or below will be exempt from the tax.

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