POLICY RECOMMENDATION | Keep the EPR Mechanism Intact, Do Not Turn It into an Environmental Protection Tax
I. Background
The Ministry of Finance is studying amendments and supplements to the Law on Environmental Protection Tax, including a proposal to broaden the range of taxable items and to consider bringing responsibility for treating waste from products and packaging into the tax mechanism.
This proposal risks a fundamental change in Viet Nam's approach to Extended Producer Responsibility (EPR), which is already established in the 2020 Law on Environmental Protection and is being rolled out along an agreed roadmap.
II. Analysis
1. No international precedent
- More than 400 EPR schemes are currently in operation worldwide, across Europe, North America, North Asia, ASEAN and Australia.
- No country applies EPR by collecting a tax into the State budget.
- EPR schemes everywhere rest on one principle: the producer is directly responsible for the products it places on the market.
2. EPR and taxation differ in nature
- EPR: the producer discharges a social responsibility and can see the direct effect of its contribution on waste collection, recycling and treatment.
- Tax: the producer merely meets a financial obligation to the State; the money flows into the general budget and is not tied directly to waste treatment objectives.
This risks stripping away both the transparency and the motivation of producers and of society.
3. A tax will not change behaviour
One of the central objectives of EPR is to drive:
- Innovation in product design, oriented towards ecodesign.
- A shift in production models towards environmentally friendly practice.
- Changes in consumer habits towards sustainability.
A tax, by contrast, is only a financial obligation. Viet Nam's experience with the plastic bag tax shows that tax policy produced almost no environmental effect and in some respects worked against its purpose.
4. EPR is already delivering visible benefits
Implementation of EPR in Viet Nam has already shown that:
- Materials that were previously never collected are now entering the recycling system.
- Recycling rates are rising year on year.
- Businesses are starting to change product design in a more environmentally friendly direction.
- Consumers are increasingly making informed choices and living greener.
Switching to a tax risks wiping out all of these positive effects.
5. The EPR management mechanism is ready
- The mechanism for managing and using the financial contributions of producers and importers has been drafted and is being prepared for submission to the Government.
- That mechanism makes it possible to:
- Support local authorities in collecting and treating municipal solid waste.
- Deal with products and packaging that are difficult to collect and recycle.
- Producers can see the direct results of their own contributions, which strengthens their motivation to work alongside society.
III. Recommendations
- Keep the EPR mechanism as set out in the 2020 Law on Environmental Protection; do not convert this responsibility into a tax.
- Improve the management and oversight of the EPR fund to ensure transparency, fairness and effectiveness, and thereby strengthen business confidence.
- Promote policy dialogue between the Ministry of Finance, the Ministry of Natural Resources and Environment, the business community and other stakeholders to ensure consistent implementation.
- Learn from international experience drawn from successful EPR schemes in Europe, North America, North Asia and ASEAN, rather than creating a tax mechanism with no precedent anywhere.
- Communicate with the public so that citizens and businesses understand the direct benefits of EPR, building support and consensus.
IV. Conclusion
Turning EPR into an environmental protection tax runs against international practice, strips EPR of what makes it work, and risks destroying the social and environmental changes now taking shape. Viet Nam should stay the course with an EPR mechanism that meets international standards while refining the rules to guarantee transparency and effectiveness, contributing to its sustainable development commitments.