Extended environmental tax cut to go into effect in Vietnam

Vietnam will cut environmental taxes on fuel by half starting today through the end of the year. 

As soaring energy prices aggravate inflationary pressures, the Vietnamese national assembly approved a tax cut by half on gasoline and diesel fuel. While kerosene taxes will not change, duties on jet fuel will be reduced from 1,500 VND (0.064 USD) to the price of 1,000 VND (0.043 USD) per liter. 

Amid rising global energy prices, Vietnam is facing inflation pressure given the country’s heavy reliance on imported fuels, equipment and materials. Hanoi aims to ensure economic stability by curbing the keeping inflation below 4%. As economic stability becomes a focal point, the country will fall behind in the short to medium terms on its climate commitment to reduce coal consumption. 

Expect further tax cuts on fuel this year. Vietnam is targeting a GDP growth of 7% for 2022 and is looking to increase national fuel reserves by four times the current capacity. Amid rising fuel prices, Vietnam is likely to increase coal imports from Indonesia and Australia. In the long run, it is likely that Vietnam will struggle to meet its net-zero commitments given the trajectory of the country’s economic growth.