Vietnam - Import tax cut urged over fuel price hike pressure

Vietnam is under pressure to increase petroleum retail prices as import prices have risen, but insiders have suggested cutting import taxes instead to prevent burdening consumers with a fuel price hike.

A92 gasoline was quoted at $131.95 a barrel on Wednesday’s closing session in Singapore, where Vietnam sources most of its fuel. Between last weekend and early this week, A92 prices revolved around $132 a barrel, some $15 a barrel higher than the rates a month ago.

Vietnamese fuel wholesalers say they have been suffering losses of VND500 – 600 on every liter of A92 gasoline as of Monday.

The losses are in fact up to VND1,600 a liter, but the wholesalers were allowed to use VND1,000 from the fuel price stabilization fund to make up for the loss earlier this month, under the Ministry of Finance’s bid to maintain fuel prices.

The VND600 per liter loss, however, has still forced wholesalers to lower the commissions for their dealers.

Fuel dealers say they are currently facing a paradox in which more sales mean more losses, as commissions dropped to only VND300 – 350 a liter on Thursday.

Tax cuts

A fuel price cut is inevitable, given the state of current import prices, commented Pham Quoc Tuan, who runs the xangdau.net (fuel) website.

“Both wholesalers and retailers are suffering losses, but it should be taken into consideration that the fuel import duty is currently set at 12 per cent,” he said.

Cutting the import duty can partially help reduce pressure to hike prices, but this solution will hurt state budget collection, he added.

Many fuel experts also said the finance ministry should consider accepting the budget collection loss and slash the import tax instead of raising retail prices. Higher fuel prices will raise prices for a number of other commodities, which will negatively impact consumers, and increase business expenses, the experts said.

If fuel prices are hiked by VND1,000 – VND1,300 a liter, the consumer price index will accordingly rise by up to 0.16 percent in March, according to a study released by Viet Capital Securities Co on Wednesday.

Meanwhile, if the import duty is cut by 2 to 4 percent, fuel prices will only have to be hiked by VND900 a liter, which will increase the CPI by only 0.05 – 0.1 percent, the VCSC experts said.

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