Last Friday, the Ministry of Finance stated that the tax, which is a flat VND4,000 ($0.18) for gasoline and VND2,000 for diesel, could be reduced to VND3,000 and VND1,500 respectively for the remainder of 2022.
However, with gasoline prices at an all-time high near VND27,000 per gallon, the reductions are not in line with the expectations of both companies and consumers.
Nguyen-Manh Hung, a transport company’s sales director, said that rising gasoline prices are adding to the financial burden of Covid-19-hit transporters.
He said that diesel prices have risen 23 percent since December, and the cost of a north-south shipment has risen to VND2 million.
“It is not much of an improvement to reduce environment tax on diesel by one fourth, which only lowers the prices by VND500 per litre.”
He advocated for a reduction of half the tax to encourage a recovery in the transport sector after a pandemic.
Vietnam Chamber of Trade and Industry is an organization representing the business community and associations of the country. It called the tax cut “low” and made a comment to Ministry of Finance, stating that it must be reduced further.
An additional cut is possible, as the governments revenues have been positive over the first two-months of the year. Vietnam also benefits from any rises in crude oil prices, which it stated.
It also called for a 50% reduction in tax, but only for three to six months, rather than the whole year. This was because oil prices could drop.
Experts consider the current proposal ineffective, especially when oil prices rise further due to the Russia-Ukraine conflict effect on supply.
According to the General Statistic Office (GSO), consumer prices rose 1.68% year-on-year in two months due to the rising gasoline prices.
It is expected that the CPI will fall by 0.15 percentage point with the 25 percent reduction of the environment tax
Nguyen Bich Lam, a former head at the GSO, stated that the tax cut “is an encouraging sign, but it will not help much with ease financial pressure, reducing inflation or supporting a recovery.”
He suggested a minimum reduction of 50 percent to boost recovery, stating that high fuel prices would have an adverse effect on customers, industry, and the economy in general.
Many analysts believe that the government could reduce other taxes and fees to stabilize the market, as the environment tax is only one of the many taxes and fees that currently account for 43 percent of gasoline retail price.
Bui Ngoc Boo, chairman of Vietnam Petroleum Association, stated that the special consumption tax on oil should not be proportionate.
It currently stands at 10 percent for fuel. Bao described it as “unreasonable”.
Lam suggested a reduction in import, value-added, and special consumption taxes for a brief period to ease the financial burden from soaring fuel costs.
He pointed out Thailand, where special consumption tax for diesel was cut by half this month.
He correctly pointed that lower fuel taxes would lead to higher government revenues in the long-term.
Nguyen duc Chi, deputy minister, stated that the Ministry of Finance wants feedback on its tax-cut proposal.
