Tax reduction just helps reduce losses: distributor

People all say that it is necessary to slash petrol prices now to help stimulate production and consumption. What do you think about this? 

Vuong Thai Dung, Deputy General Director of Petrolimex

However, we cannot slash oil products’ prices now with such high prices in the world and the current tax rate, with which our profit is very low, just several hundred VND per litre. 

Petrolimex has many times asked state management agencies to consider slashing import taxes on oil, which would pave the way for distributors to slash sale prices. 

Don’t consumers believe that enterprises should slash sale prices even with the tax rate at 35%, as the crude oil price has been stable at $40/barrel? 

It is true that crude oil prices have seen steady decreases. However, the situation is different with petrol and oil products. In January, the petrol price increased. In the last 20 days of January, petrol increased by some $8/barrel.  

Meanwhile, the exchange rate has been increasing. Petrolimex had to purchase dollars in January 2009 at VND400/US$1 higher than in December 2008. All this has brought losses to petrol and oil distributors. This has led to the state’s decision on slashing import taxes. 

The tax reduction just can help enterprises reduce losses, while it is not big enough to support sale price decreases. 

Do you think that the 25% tax rate is reasonable? 

As I said above, the tax rate reduction just can help reduce loss. Enterprises, of course, always want lower and lower tax rates. 

Some experts have calculated that with the crude oil price at $40/barrel, the petrol sale price should be VND8,500-8,600/litre only. What would you say about that? 

I can say for sure that the figures are not reliable. If counting all the expenses, including taxes and foreign currency prices, enterprises now can earn the profit of only a few hundred VND per litre of diesel, while they have been making losses on petrol sales. State management agencies know the figures well, as we have to report our business to the ministries every day. 

Some petrol distributors have asked for permission to raise sale prices, but Petrolimex did not, why? 

Petrolimex is incurring the loss of VND1,000/litre, but we have not asked for permission to raise sale prices, because we need to share difficulties with the state and consumers. We try to bear the losses the best we can. 

Of course, we need to make profit with our business, but we can bear losses at certain times and use the profit we can make other times to offset the losses.