Vietnam has proposed halving environmental protection taxes on fuel products, as authorities seek to curb inflation and stabilise the domestic energy market, in a move that mirrors a broader global pattern of governments scaling back environmental pricing during periods of energy market stress.
The finance ministry is seeking public feedback on a draft resolution that would cut the tax on petrol, excluding ethanol, and aviation fuel to VND1,000 (7.6 US cents) per litre from VND2,000, and reduce the diesel tax to VND500 per litre from VND1,000.
Vietnam’s environmental protection tax on fuel is a fixed per-litre levy under the Law on Environmental Protection Tax, incorporated into fuel prices to reflect the environmental impact of fossil fuel use and contribute to state revenue.
The reduced rates would apply from the date of issuance until 30 June, with the government authorised to extend the measure depending on market conditions.
The environmental protection tax currently accounts for about 6.7 per cent of the base price of fuel products. Amid rapid fluctuations in global fuel prices, the proposed reduction is aimed at easing cost pressures on businesses and consumers while helping to stabilise domestic prices.
The ministry estimates the tax cuts would reduce state budget revenues by around VND1.79 trillion (US$67.9 million) per month, including lower value-added tax collections.
Vietnam’s proposal reflects a broader trend observed during recent global energy shocks, where governments have prioritised short-term economic stability over environmental pricing mechanisms.
Countries across Europe and Asia introduced similar measures during the 2022–2023 energy crisis. Germany temporarily cut fuel taxes as part of a relief package to ease pressure on households, while Italy and Spain reduced fuel duties and introduced subsidies to cushion rising costs. In Asia, South Korea and India also lowered fuel taxes to contain inflation and limit the impact of global oil price spikes on domestic consumers.
The Organisation for Economic Co-operation and Development (OECD) said that during the 2022–2023 energy crisis, many countries introduced temporary tax relief measures, including reductions in fuel excise taxes and value-added taxes on energy products, as part of wider fiscal packages to contain inflation and shield households and businesses from rising costs.
These measures were among the most common policy responses across OECD and partner economies, showing the political sensitivity of energy pricing during periods of sharp price increases, the organisation said.
At the same time, the International Energy Agency (IEA) reported that governments significantly expanded fossil fuel support, with consumption subsidies exceeding US$1 trillion in 2022, the highest level ever recorded. The surge was driven by policy interventions aimed at limiting the pass-through of high international energy prices to consumers.
The IEA noted that such measures effectively reduced the real cost of fossil fuels for end-users, helping to cushion the immediate economic impact but also slowing the shift towards cleaner energy by weakening price signals that encourage efficiency and lower emissions.
Vietnam’s finance ministry said the proposed tax adjustment is intended to support socio-economic development targets for 2026, particularly maintaining macroeconomic stability and controlling inflation, while remaining within existing legal authority.
The draft resolution is open for public consultation before being submitted for approval from the National Assembly, adding that the proposed rates represent the lowest level permitted under the authority of the National Assembly Standing Committee.
