Boosting green growth with tax instruments

Monday, 2019-03-25 10:22:49
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Vietnam needs to encourage clean energy production and green consumption by specific policies.
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NDO - Green growth is a measure for the world to overcome the severe challenges arising from economic recession, overpopulation, depleted resources, shrinking biodiversity, environmental pollution and climate change.

In order to promote green growth, many countries have employed tax instruments aimed at reducing carbon dioxide, which causes the greenhouse effect and stimulates climate change, applied clean production methods, developed green technologies and industries using little resources, and so on, to force manufacturers to include environmental protection costs into the prices of their end products.

Following this trend, Vietnam has been pursuing a tax policy that targets green growth and sustainable development by encouraging investment in green-technology and energy-saving production methods while raising the awareness on environmental protection.

However, research by the Central Institute of Economic Management shows that environmental taxes in Vietnam currently account for just 0.24% of GDP, compared with 1.33% in China, 1.48% in Japan and 2.54% in the Republic of Korea.

In fact, current tax preferential policies are not strong enough to encourage green production and consumption. According to domestic enterprises that were honoured as sustainable development businesses, of the UN’s 17 sustainable development goals for the 2015-2030 period, only four have been factored in the costs to be excluded when calculating corporate income tax.

Therefore, compliance with the Corporate Sustainability Index has increased costs for many enterprises, affecting their business and reducing their competitiveness on the global stage.

Furthermore, tax policies that restrict the production and consumption of products harmful to the environment are not very practical and revenues from this kind of tax has not matched the damage caused by such production and consumption.

In 2012, the government issued the national strategy on green growth for the 2013-2020 period with a view to 2050, based on which an action plan for green growth for the 2014-2020 has identified the major contents to be implemented.

According to the assessment of experts, however, the implementation has in fact stopped at the promulgation of documents and incorporation into socio-economic plans and strategies, with a number of basic goals on reducing energy consumption to GDP and greenhouse gas emissions.

To realise the green growth strategy towards sustainable development, it is necessary to implement many concurrent policy instruments, such as credit policy and financial policy, of which tax is one of the core instruments.

In the future, it will be necessary to fine-tune the corporate income tax preferential policy in terms of both tax rates and incentive periods in order to attract selective investment in high-tech and environmentally friendly industries with high added value.

At the same time, the government needs to encourage clean energy production and green consumption by specific policies such as substantially reducing special consumption tax on biofuels and taxes on electric public bus services.