THE Vietnamese government has ordered the relevant ministries to study the possibility of lowering the environmental tax on fuel amid surging prices.
In making the call, Prime Minister Pham Minh Chinh told both the Industry and Trade Ministry and the Finance Ministry to make a submission on the issue by Feb 28.
According to a Vn Express report, the environmental tax on the popular RON 95 petrol is now VND4,000 per liter (US$0.18) or around 15 per cent of its retail price.
There is also a special consumption tax of eight to 10 per cent, an import tax of eight per cent and a value-added tax of 10 per cent.
These taxes add up to about 43 per cent of the retail price of fuel in the country.
However, the government said the prices were lower than average when compared with other countries, where it stands at 45 to 60 per cent.
A reduction in the tax will also help push prices down after it reached a historic high this week.
The RON 95 now retails at VND26,280 per litre while the biofuel E5 RON 92 retails at VND25,530.
Fuel prices spiked after the Nghi Son refinery cut production recently due to a cash crunch.
The government has since moved to import more oil and has also given financing to the refinery to raise its production capacity but is unable restore supplies immediately.
Fuel shortages have already been reported in the country, especially in the south, and the government has announced a plan to auction 102 million tonnes of RON 92 fuel from the national reserves to increase supply.
Meanwhile, experts said reducing fuel taxes and fees, and using the price stabilisation fund could help “cool down” surging fuel prices amid the current shortages.
Can Van Luc, head economist of state-owned lender BIDV, said the government could lower the special consumption tax for a short period to reduce retail prices as some countries have done.
He said Thailand had recently done so for diesel by reducing the tax by half for three months.
According to the Vn Express, although calls for a reduction of taxes and fees have been made for years, the Finance Ministry has rejected the proposal as it was a big source of revenue for the government.
Another concern is that reductions in taxes and fees will lower fuel retail prices, which could then lead to smuggling to neighboring countries like Laos and Cambodia where prices are higher, said Dinh Trong Thinh of the Finance Institute.
To better manage fuel prices, he proposed that the government reconsiders the use of the petroleum stabilisation fund.
The fund, set up by the government to stabilise fuel prices, is a mechanism of saving a portion of what customers pay for fuel so that it can be used to halt prices from rising.
However, the trade and finance ministries said the stabilisation fund was important for controlling inflation and keeping the prices of goods from surging unexpectedly.
It had used the fund to reduce Monday’s price hike.
Source: New Straits Times
