HANOI: Vietnam is looking to increase an environmental protection duty imposed on fuel products from the current VND3,000 (13 U.S. cents) to VND4,000 per liter, according to a proposed amendment to the Environment Protection Law drafted by the Ministry of Finance.
Explaining the hike, the ministry said it would add VND15.7 trillion ($690 million) to the state budget, offsetting a shortfall caused by a fuel import tax cut.
Under a free trade agreement between the Association of Southeast Asian Nations (ASEAN) and South Korea, which came into effect in early 2016, the import tariff on gasoline imported from South Korea to Vietnam has fallen from 20 percent to 10 percent.
As a result, most Vietnamese traders who had improted gasoline from ASEAN countries switched to South Korea because the import tariff on gasoline from the former still stands at 20 percent.
Meanwhile, retail pump prices in Vietnam are lower than in many neighboring countries, including ASEAN nations, according to the Finance Ministry.
The Ministry of Finance has also proposed an increase to the environmental protection duty imposed on oil products by VND500-1,000 per liter.
Fuel is a major source of revenue for Vietnam. Import tariffs from fuel, which are paid by local businesses, now account for around 7 percent of the state’s income, according to the petroleum association. With import tariffs set to be abolished as part of free trade deals, a higher tax will help sustain that income, said experts. Nguyen Tien Thoa, former director of the finance ministry’s price management department, said tax hikes will draw “reactions” from consumers and might affect consumption.