Vietnamese government approves fuel tax hike proposal in fight against pollution

Vietnam is looking to increase environmental taxes to the highest level permitted for fuels, according to a recent proposal by the Ministry of Finance already approved by the Prime Minister.

Under the proposal, which is currently under review by the Standing Committee of the legislative National Assembly, petroleum tax will increase by 33 percent to VND4,000 per liter (17 cent) and diesel tax by 33 percent to VND2,000 per liter.

Taxes are also being hiked for mazut and motor oil.

If passed, the tax hike would go into effect starting from July 1.

The proposed hike is expected to add VND14,368 billion (nearly $631.5 million) to Vietnam’s national budget and the consumer price index from June to July would increase by 0.27-0.29 percent, according to government calculations.

The government hopes higher environmental taxes will encourage efficient energy usage and a switch to more environmentally friendly products, thus reducing emissions and air pollution.

As Southeast Asia’s fastest-growing economy, Vietnam is facing an air pollution problem. The capital Hanoi enjoyed little more than one month of clean air last year, according to a January report by the Green Innovation and Development Center.

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.

Vietnam gained VND42.4 trillion in revenue from environmental protection taxes in 2016, jumping nearly 57 percent from 2015.

During the same period, spending on environmental protection reached just VND12.3 trillion, accounting for 29 percent of the tax revenue.