To form and apply economic tools in environmental management in Vietnam, breakthrough measures have been devised by the Ministry of Finance with the technical assistance of the European Union.
These measures were introduced at a workshop on opportunities and challenges in the application of environmental protection tax policies in Vietnam, held early this month in Ho Chi Minh City.
They include forming and expanding a network of researches in economic tools in environmental management; clearly identifying major objectives and responsibilities for drafting and issuing regulations on the application of these tools; increasing investments in and developing programs on research and application of these economic tools; and raising awareness and creating consent and support of stakeholders and the community.
According to Dr. Nguyen Trung Thang from the Institute of Strategy and Policy on Natural Resources and Environment under the Ministry of Natural Resources and Environment, Vietnam lacks many economic and managerial tools and the existing tools in environmental management fail to embrace all subjects and agents causing environmental pollution and degradation. He said that environmental protection taxes and charges were insufficient for preventing wanton exploitation of minerals, export of coal, iron and manganese ores and discharge of pollutants into the water, land and air surroundings.
Deputy Director of the Ministry of Finance’s Tax Policy Department Vu Khac Liem shared this view. “Environmental impact assessment has been made compulsory. We have been studying the application of economic tools to environmental management, one of which is environmental protection tax policy,” he said.
A two-phase roadmap for implementing the above measures has been worked out. From now to 2010, five major issues will be implemented: (i) supplementing and improving environmental protection charges on the “polluter pays” principle; (ii) extensively and effectively applying the mechanism of paying deposits for environmental rehabilitation in mining activities; (iii) developing more environmental protection funds; (iv) initially experimenting the determination and compensation of damage in cases of traditional pollution or degradation; and (v) providing incentives and supports for environmental protection activities and environmentally friendly products. In the 2010-15 period, some environmental taxes will be introduced on the “beneficiary pays” principle, the mechanism of payment of deposits by mining companies will be widely implemented and the network of environmental protection funds will be expanded. In addition, a market of emissions permits and a deposit payment mechanism that holds producers responsible for environmental issues throughout the product life cycle will be studied and operated on a pilot basis.
Currently, Vietnam does not have a separate tax for environmental protection. Several laws, such as those on excise tax, corporate income tax, royalties and agricultural land use tax, contain provisions related to environmental protection.
The 1998 Excise Tax Law, amended twice in 2003 and 2005, imposes excise tax on several commodities on the grounds that their manufacture or use badly affects the environment. These commodities include cigarettes, cigars, liquor and beer, cars of under 24 seats, gasoline of all kinds, and air conditioners of 90,000 BTU or less.
While stipulating that establishments producing and trading in goods or providing services must pay corporate income tax at a rate of 28%, the 2003 Corporate Income Tax subjects businesses prospecting, exploring and exploiting petroleum and other precious natural resources to a much higher tax rate, ranging from 28-50%, depending on each project or business.
The 1998 Ordinance on Royalties, the 1993 Law on Agricultural Land Use Tax and the 1994 Ordinance on Surtax on Households Using Agricultural Land in Excess of Area Quotas also have provisions dealing with environmental protection and prevention of the exhaustion of natural resources.
Regarding charges and fees, as per Government Decree No. 24/2006/ND-CP of March 6, 2003, environmental protection charges and fees include environmental protection charges for wastewater, environmental protection charges for solid wastes, sanitation charges, environmental protection charges for mining activities, environmental protection charges for emissions, charges for environmental impact assessment and appraisal, charges for evaluation of business conditions in the field of science, technology and environment, and charges for appraisal of environmental activity conditions.-