Vietnam National Oil and Gas Group (PVN) has proposed to cut fuel tax rate to reduce losses due to decreasing world fuel prices.

PVN is seeking yet more preferential tax treatment

PVN has asked the Ministry of Finance to adjust the fuel tax rate to aid their member company and manager of Dung Quat Refinery, Binh Son Refining and Petrochemical Company.

A representative of Binh Son Company said a textile or food processing company can halt operations for a few days if they had to incur high tax rate or large inventory, however, a big oil refinery is different because it will take two weeks to halt refinery operations and 10 days to restart. It is also emphasised that the refinery provides 35 percent of the country's yield of oil and claimed the shutdown would threaten the national energy security.

In last November, PVN also sought approval to lower tax rates at Dung Quat Oil Refinery because of poor competitiveness in relation to imported fuels. Diesel import taxes for products imported from ASEAN countries were cut to 0% from 2016 in accordance with ASEAN Trade in Goods Agreement. However products from Dung Quat are still for some reason subjected to an import tax of 10%.

Dung Quat Refinery uses high quality crude oil and its other logistic costs are also high. Under the special treatment approved by the Ministry of Finance in 2012, domestically produced petrol at Dung Quat Refinery is allowed to include import taxes in its prices. If the general import duties are lower than the incentives then government will have to make up for the gap.

Several big customers including Petrolimex have reduced orders and demand for diesel in Vietnam has been on a downward trend so businesses prefer imported options because of the tax incentives. According to PVN, the situation has worsened as world fuel prices dropped.

Deputy Minister of Finance Do Hoang Anh Tuan said that they would issue proper measures to help Dung Quat Refinery. He said PVN's proposal was reasonable and they would have to ensure a fair playground for both overseas and domestic firms.

In regards to whether the government will have to make up for the gap or not, Tuan said they would propose a new financial mechanism for Binh Son Company after the ASEAN-Korea Free Trade Area took effect.

This is not the first time PVN has voiced concern that Dung Quat Refinery faced the risk of shutdown. In last April, the Ministry of Finance cut import tariffs on petrol from 35 to 20 percent and 30 to 20 percent for diesel.

Despite the difficulties, Binh Son Company still reported post-tax profits of nearly VND5.7trn (USD271m) last year, 52 percent higher than their target. Dung Quat Refinery is receiving huge incentives including a 5-year import tax exemption, 15-year land tax exemption and 50 percent personal income tax reduction.

Dtinews