Vietnam’s fuel association calls for tax hikes as zero import duty nears

The association chairman believes taxes should always account for at least 50 percent of the retail fuel price to protect state revenue

A tanker truck refills patrol for a filling station in Ho Chi Minh City.

The Vietnam Petroleum Association has proposed various measures, including increasing several domestic taxes, to help protect the petroleum sector once import duties on fuel products are gradually reduced to zero.

Phan The Rue, the association’s chairman, believes taxes should always account for at least 50 percent of the retail fuel price to ensure state revenue, a stance that has sparked protests from local consumers.

“It is essential to levy higher domestic taxes on fuel to make up for the losses to the state budget caused by reduced import duties,” Rue, a former deputy minister of trade, said at a conference in Hanoi on Tuesday.

According to trade accords Vietnam has joined, import duty on fuel will be zeroed by 2024, with Rue urging that the country start increasing environmental protection, domestic consumption and value-added taxes on fuel as early as 2018.

“Once the import duty is cut to zero, we should increase other taxes to make up for the loss,” Rue said.

The Vietnam Petroleum Association chairman said that higher taxes will not affect retail fuel prices, given the reduced import tariff.

He suggested that consumers should not be opposed to any tax increases, because “paying higher taxes is how every citizen shows their responsibility to the country.”

Vietnam’s Ministry of Finance is drafting a bill suggesting a lift on the maximum allowed environmental protection tax on gasoline to VND8,000 per liter from the current VND3,000.

A92 gasoline, the country’s most widely used fuel, currently sells for VND17,310 a liter including the VND3,000 per litre environment tax. Should the new tax rate be applied, the price would rise to more than VND22,000 a liter, according to analysts.

At Tuesday’s conference, Rue reiterated his support for an VND8,000 tax cap, urging a roadmap be prepared to begin applying a new tax framework.

In response, Truong Dinh Tuyen, a former minister of trade, said increasing taxes was not a proper solution.

“What’s more important is to create a competitive fuel market that provides the best retail prices for consumers,” Tuyen said.

“In reality, we currently have 29 fuel wholesalers, but some of them hold market share of more than 30 percent.”

Tuyen said increasing taxes may help reduce losses to the state revenue, but it’s not a sustainable solution.

“We should try instead to cut taxes and help local businesses reduce input cost, which helps boost their performance,” Tuyen elaborated.

“Healthy businesses will achieve bigger incomes, which are a stable and sustainable source of revenue for the state coffers.”

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