Vietnam looks for year-long extension to environmental protection tax break

The Vietnamese government has sought parliamentary approval for a plan to extend the environmental protection tax cut on fuels through the end of next year, in a move to aid economic activity and help tame inflation.

The government now levies an environment protection tax of VND2,000 ($0.08) on a liter of gasoline after a 50% cut. After a similar cut, the tax on mazut, lubricants and diesel is VND1,000 per liter.

The tax on kerosene and jet fuel is VND600 and VND1,000 per liter, below their respective ceiling rates of VND1,000 and VND3,000.

The environmental protection tax cut on fuels has been in place since April 2022 and is valid till end-December this year.

The tax cuts will cost the state budget VND38.92 trillion ($1.6 billion) each month, the government said in a communication sent to the Standing Committee of the National Assembly. If the corresponding value added tax (10%) is included, the cost will rise to VND42.45 trillion ($1.75 billion).

However, the extended tax cut will help keep fuel retail prices down, provide some relief to consumers and lower production costs. Fuel-intensive companies in the transport and fishing sectors will particularly benefit from the extension.

According to the General Statistics Office, in case the tax cut is not extended, the average consumer price index (CPI) will increase by 0.36-0.54 percentage points.

The Ministry of Finance, which has drafted the extension proposal, has said it will closely monitor world fuel price movements for any adjustments needed.

The Vietnam Chamber of Commerce and Industry (VCCI) welcomed the proposed tax cut throughout next year, saying it will help control inflation, stabilize macroeconomic conditions, support businesses, and accelerate economic recovery.