Vietnam's fuel tax hike proposal could set fire of resentment

By Nguyen Khac Giang   June 23, 2018 | 11:11 am GMT+7
Vietnam's fuel tax hike proposal could set fire of resentment
Vietnam plans to increase the current environmental tax rates for petroleum and diesel to the highest level permitted for fuels, at VND4,000 per liter. Photo by VnExpress/Quynh Tran

Why should we pay more environmental taxes when we are not convinced they’ll be put to good use?

Recently, the Ministry of Finance proposed a fuel tax hike in order to “reduce emissions” and “pay off national debts.”

If passed, the hike would increase the current environmental tax rates for petroleum and diesel to the highest level permitted for fuels, at VND4,000 ($0.18) per liter.

Every morning, I commute to work on my old, trusty Yamaha-brand motorbike. Every week, I stop by gas stations twice to buy four liters of gasoline for my bike. If the fuel tax hike proposal is passed, I would have to spend an extra VND16,000. Every month, VND64,000 would go from my pocket into the national budget.

It’s not about the money. VND64,000 is only worth about three cups of coffee or two bowls of pho, though I have to I admit that paying taxes is nowhere near as fun as drinking coffee or eating pho. But look at what’s happening right now. My neighborhood is still infested with trash. Thick clouds of dust rise from the ground as cars and motorbikes rush down the streets. Our air pollution level is always off the charts, especially on hot summer days. News of unresolved environmental issues are constantly in the headlines.

It is clear that the government isn’t doing enough to protect the environment. Therefore, I do not agree with the Ministry of Finance’s tax hike proposal.

Now imagine a scenario with your friendly neighborhood. One day, a notice comes up, saying the environmental tax for every household has been increased in order to “raise awareness” and “help keep our living space clean.” Nothing too suspicious, you might think. But the neighborhood’s budget has already run out, and this tax increase will be added directly to that budget. There is also no guarantee that the money would be used to actually “improve our living space.”

I believe that such a decision would be met with stiff opposition from the citizens. Trust me, for this actually happened in my neighborhood. The reason is simple: people want an explanation on how the public budget is being spent, and they want to voice their opinions on decisions that would cost them their hard earned money. Sure, the neighborhood’s administration might not be wrong in making its decision, but if they cannot convince the people that it is the right one, it should take it on its own.

A nation is an expanded version of your friendly neighborhood. And the tax increase there is exactly like the fuel tax hike proposed by the Ministry of Finance.

The ministry’s rhetoric about improving the environment, is just that, rhetoric, if it does not give us concrete steps to back what it says. It is not surprising that so many people have reacted negatively to this tax hike proposal.

Like any other tax hike that is proposed, the ministry isn’t exactly “wrong” when it says that environmental taxes aren’t necessarily used directly to protect the environment, since all tax money goes to the national budget and is used for various purposes.

But that doesn’t mean the proposal is justified. The ministry says reduced revenues from tariffs are increasing the national budget deficit, and therefore, the fuel tax hike is needed.

The thing is, our environmental taxes currently account for 4 percent of the national budget, and it increased from VND11.6 trillion to VND44 trillion in just five years, from 2012 to 2017. If the latest fuel tax hike is passed, each year, the national budget would receive an extra VND17 trillion.

While that is good for the budget, the effects of such a tax hike would spread through the population like wildfire, impacting every aspect of our lives. What worries me more is how there has been no sign showing that the ministry has thought this proposal through, but it wants the tax to go into effect as soon as July 1.

How can the people accept such a hike happily, when Hanoi and Ho Chi Minh City are still among the most polluted cities in Asia, when our waste treatment systems still perennially fail us?

Taxes are basically what the people pay the government to serve their needs. To convince them to pay additional environmental taxes while existing issues show no sign of resolution is not reasonable.

It is said that the only things certain in life are death and taxes.

No matter how much we voice our opposition, there is no escaping taxes on essentials like fuel. However, if the government and the public cannot come to a mutual agreement on this, the ensuing resentment can lead to social issues.

Historically speaking, opposition to the government imposing (unjust) taxes has the main cause for political instability.

Economist Daron Acemoglu and political scientist James A. Robinson, authors of "Why Nations Fail: The Origins of Power, Prosperity, and Poverty," have shown through data that the amount of taxes a nation imposes upon its people positively correlates with that nation’s responsibility to be accountable.

“Accountability” might seem like a big word, but what it entails is quite simple: transparency on public spending and exercise of the right of the people to voice their concerns and monitor the administrative system. Only when the principle of accountability is fully embraced by the government will people understand that paying taxes isn’t simply a duty, but also a privilege.

*Nguyen Khac Giang is a Vietnamese researcher at the Vietnam Institute for Economic and Policy Research. The opinions expressed are his own.

 
 
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