The Ministry of Finance has disagreed with a proposal by Long Son Petrochemicals (LSP), the investor of the $5.4-billion Long Son Petrochemicals Complex, to raise the most-favored nation (MFN) tax on some plastics products from 0% to 3%.
In a ministerial draft document sent for the government’s approval, LSP and its Thai parent firm Siam Cement Group (SCG) suggested a 3% MFN tax rate on imported polypropylene (PP) and polyethylene (PE) products, under HS codes 3902.90.90, 3901.10.92, 3901.20.00, and 3901.40.00.
The ministry clarified that per the investment certificate granted to LSP, some PP and PE products are already subject to 3% MFN tax, except for the ones under the four mentioned HS codes.
Vietnam currently import 1.2 million tons of PP and PE per year under MFN tax, including 600,000 tons for domestic consumption and 600,000 tons for export-oriented production that are not subject to import taxes.
LSP said its yearly output of 420,000-483,000 tons of PP and 525,000 tons of PE can meet domestic demand.
The finance ministry said the tax changes need serious consideration as they may negatively impact businesses that are not supplied by LSP and imports of such products from nations without free trade agreements (FTA) with Vietnam.
The ministry has proposed two solutions. First, the MFN tax can be set at 2%. That would fortify Vietnam’s support and incentive commitments to LSP as specified in its investment registration certificate and facilitate the development of domestic firms in the sector, it noted. However, the increase in tax revenue might be minimal as firms may adapt by importing from countries that hold FTAs with Vietnam, instead of Middle East nations.
The second solution is not to apply any changes as it would keep prices and supplies stable.
The finance ministry asked relevant sides to submit their opinions to the draft document by December 1, 2023.