A fuel station in Hanoi, Vietnam (Photo: VNA)

Hanoi - The Ministry of Finance (MoF) has proposed extending the environmental tax reduction on fuel products until the end of 2024.

According to the ministry, it has started a process to collect opinions and feedback on the extension, which is to be submitted to the National Assembly for final approval. The tax cut, if passed by the NA, will take effect on January 1, 2024.

The proposal is a continuation of an already-in-effect tax cut, which imposes a tax rate of 2,000 VND per litre for gasoline, 600 VND for kerosene, and 1,000 VND for diesel, fuel oil, lubricant and aeroplane fuel.

When the extension expires at the end of 2024, the tax rate will go back to the previous level at 4,000 VND per litre for gasoline, 1,000 VND for kerosene, 2,000 VND for diesel, fuel oil and lubricant, and 3,000 VND for aeroplane fuel.

The ministry said the tax cut proposal is subject to change, depending on the global oil prices. The MoF has been and will continue collaborating with other governmental ministries and agencies to monitor domestic fuel prices.

In addition, slowing down the rise of fuel prices will likely contribute to the Government's inflation control efforts and stabilise the macro-economic factors.

All things remaining the same, the ministry said it anticipates a drop in domestic fuel prices in 2024 by 2,200 VND per litre for gasoline; aeroplane fuel by 2,200 VND; diesel, fuel oil and lubricant by 1,100 VND; and kerosene by 440 VND.

According to economists and policymakers, fuel plays an important role as input in many industries. By slashing the environmental tax, the Government is aiming to provide additional support to all economic stakeholders and consumers, boosting economic recovery and helping businesses expand operations.

On the other hand, budget collection will likely take a hit, according to the ministry. Given the same amount of consumption anticipated for this year, the State budget will likely see a drop in environmental tax of 43 trillion VND (1.75 billion USD).

The tax cut has been praised by economists and the business community as one of the more practical and most efficient support policies by the Government for economic recovery post-COVID-19.