The National Assembly (NA) of Vietnam has sanctioned the reduction of all fuel-related taxes to zero until June 30, in a move to mitigate price pressures, stabilize markets, and bolster economic resurgence in the face of global energy instability. This means that all taxes on gasoline, oil, and aviation fuel, covering environmental protection tax, value-added tax (VAT), and special consumption tax will be eradicated, as decreed by a resolution passed by the NA.
The environmental protection tax on gasoline (excluding ethanol), diesel, aviation fuel, kerosene, and mazut will be nullified, along with the special consumption tax on gasoline. Additionally, gasoline, diesel, and aviation fuel will be exempt from VAT declaration and payment, though input VAT will remain deductible.
This tax policy will be effective from April 16 through June 30. Businesses and importers handling gasoline, oil products such as diesel, kerosene, and mazut, and aviation fuel will not be obliged to declare or pay VAT at either the import or sales stages. In the event of emergencies, the government reserves the right to modify the duration of the policy, either shortening or extending it, and will report any such changes to the NA at its forthcoming session.
According to the Ministry of Industry and Trade, taxes make up a substantial portion of fuel base prices, with VAT accounting for around 7.4%, environmental protection tax 2.7-6%, and special consumption tax approximately 6.7%. The annulment of these taxes is viewed as a strategy to support socio-economic development goals and curb inflation.
Environmental protection tax, VAT, and special consumption tax on gasoline (excluding ethanol), diesel, and aviation fuel have already been lowered to zero under an existing decree, effective through April 15. However, kerosene and mazut have remained subject to environmental protection taxes of VND600 and VND1,000 per liter or kilogram, respectively, in addition to a 10% VAT.
A government report states that reducing environmental protection tax on all types of fuel to zero is likely to decrease state budget revenues by an average of VND7.3 trillion ($277.19 million) per month. Despite this, the government views this move as a “special fiscal measure applied in exceptional circumstances” to alleviate the impact of global energy price fluctuations and preserve macroeconomic stability and social security.
The ongoing conflict in the Middle East has significantly impacted global energy markets, including Vietnam, leading to a surge in fuel prices. The government has also implemented additional measures to manage fuel prices and support businesses and consumers.
What is the significance of this policy change by the Vietnamese government?
The nullification of all fuel-related taxes is aimed at mitigating price pressures, stabilizing markets, and bolstering economic resurgence amidst global energy instability.
What are the potential fiscal implications of reducing all fuel-related taxes to zero?
The government anticipates a reduction in state budget revenues by an average of VND7.3 trillion ($277.19 million) per month. Despite this expected shortfall, they view it as a necessary measure under the current global energy circumstances.
How has the conflict in the Middle East impacted Vietnam’s fuel market?
The ongoing strife has significantly impacted global energy markets, including Vietnam, leading to a surge in fuel prices. Consequently, the Vietnamese government has had to implement measures to manage fuel prices and support businesses and consumers.
