Proposal to reduce environmental taxes on gasoline and diesel to zero through year-end, with VAT and excise taxes also set at zero

Associate Professor Dr. Tran Hoang Ngan has proposed extending the tax cuts on gasoline and diesel through the end of this year, rather than ending them on the government’s proposed deadline of June 30.

On the afternoon of April 10, the National Assembly discussed a draft Resolution on environmental protection tax, value-added tax (VAT), and special consumption tax on gasoline, diesel, and aviation fuel.

Government proposal

Under the draft, the government proposes reducing the environmental tax on gasoline (excluding ethanol), diesel fuel, aviation fuel, kerosene, and mazut to zero dong. In addition, gasoline, diesel, and aviation fuel would be outside the VAT declaration and payment regime, while input VAT would remain deductible. The draft also proposes special consumption tax rates on various types of gasoline at 0%.

Delegate support and rationale

Most delegates supported the policy, saying it would help businesses and people amid the Middle East conflict, which has contributed to global energy market volatility and affected domestic fuel prices.

Proposal to extend the effective period

While agreeing with the government’s proposal and the Economic-Financial Committee’s report, PGS. TS Tran Hoang Ngan recommended considering extending the effective period to the end of the year or at least to September 30.

Mr. Ngan noted that the draft Resolution includes a clause allowing the Prime Minister to make a special decision to adjust the effective period (shorten or extend). However, he said this does not ensure stability for businesses and the public.

He also argued that if world crude prices ease in the future, there may be no need to adjust fuel taxes. “We need to share with people and businesses affected when fuel prices rose in the past,” Mr. Ngan said.

Budget impact and committee view

Nguyen Minh Son, deputy head of the Economic and Financial Committee of the National Assembly, debated the implementation period with Mr. Ngan. He said the government’s bill would reduce budget revenue by about 7,300 billion dong per month and about 18,250 billion dong over 2.5 months.

He added that if an additional 8,000 billion dong (advanced from the fuel price stabilization fund from the budget) is included, the budget could be affected by about 26,250 billion dong. “This would directly affect investment in development, public investment, social welfare programs, increase pressure on public debt, and impact long-term growth,” he said.

For that reason, he agreed with the National Assembly’s proposal to authorize the Prime Minister to issue a special decision depending on actual conditions.

Need for stability and inflation concerns

After the discussion, Mr. Tran Hoang Ngan said enterprises and people have high expectations when a Resolution is issued. He emphasized that the legal framework needs stability and should be extended.

He cited an example of a meal price rising from 10,000 dong to 15,000 dong, a 50% increase when fuel prices rise. “We have not yet seen inflation (CPI) change due to the lag from external effects to Vietnam; it will take more time. Therefore, stability and price control are important,” he said.

Revenue data and potential support

Mr. Ngan also pointed to state revenue performance. In Q1, state revenue reached 823,000 billion dong, up more than 80,000 billion dong compared with the same period last year. He said this additional revenue could be used to subsidize or support fuel prices to reduce the burden on people and businesses.

Next step

The National Assembly will vote to approve the draft Resolution on environmental protection tax, VAT, and excise tax on gasoline, diesel, and aviation fuel on the morning of April 12.