State budget faces 1.4 billion USD drop from fuel tax cuts

Hanoi (VNS/VNA) - Measures taken to bring down petrol prices could reduce State budget collection by 32.5 trillion VND (1.4 billion USD) this year, according to Deputy Minister of Finance Nguyen Duc Chi.

Speaking to reporters at the ministry's monthly meeting, Chi said the Ministry of Finance has put forward a proposal to cut or remove a number of fees and taxes on fuel imports in an attempt to rein in rising petrol prices, which has been hurting economic recovery and businesses.

The proposal, which has been approved by the National Assembly's Standing Committee, brought import tax on gasoline from 2,000 VND to 1,000 VND per litre, jet fuel from 1,500 VND to 1,000 VND, diesel from 1,000 VND to 500 VND and lubricant from 1,000 VND to 300 VND per kilogramme.

Chairman of the NA Vuong Dinh Hue said as fuel was considered among the country's strategic commodities the government was to utilise all measures and policies at its disposal to regulate prices for the benefit of economic recovery and stability. 

The deputy minister said if implemented from August, the cuts would likely result in a 7 trillion VND (302 million USD) drop in the State budget. Combined with previous cuts under decisions by the NA's Standing Committee since the beginning of the year, the State budget collection, by the ministry’s estimation, will fall by 1.4 billion USD in 2022.

As global oil prices continue to rise, Vietnam’s oil export was said to increase by 9 trillion VND this year, which helps offset the drop in State budget collection after the tax cuts.

“We have also been looking into other ways to help bring down domestic petrol prices including possible import tax breaks, VAT and special consumption tax cuts,” said the deputy minister.

For the time being, the ministry is to closely watch global and domestic petrol prices to make sure timely interventions can be implemented to best support the country’s socio-economic development.

Bui Ngoc Bao, President of the Vietnam Petroleum Association (VINPA), called on the ministry to reduce the country’s current most-favoured-nation tariff from 10% to 8% for a fixed period of time and to tighten regulations on fuel trading.

In a recent online conference with local governments, Prime Minister Pham Minh Chinh told governmental offices and ministries all policy and fiscal tools were made available to policymakers in order to bring down Vietnam’s petrol prices. However, he said the implementation must be carried out step-by-step to ensure fuel traders receive the best possible support.

Since the beginning of the year, fuel prices in Vietnam have increased 13 times, bringing fuel prices to a historically high level with RON 95-III gasoline (the most commonly used type in the country) to 32,760 VND per litre, E5 RON 92 to 30,890 VND and diesel to 29,610 VND per litre, nearly 50% higher than January 2022./.