Hanoi (VNA) - The Vietnam Petroleum Association (VINPA)has proposed to establish commercial barriers to protect local firms onceimport duties on fuel products are gradually reduced to zero percent.

VINPA Chairman Phan TheRue said gradual tax reduction to zero percent had put pressure on domesticpetroleum producers and distributors.

Rue told the media thatthe country should have a long-term development strategy for the petrol market,at least to the year 2020. In particular, important policies of whether thelocal market should be opened to foreign companies or not should be formulated.

Currently, several petroleum firms havebeen selling shares to FDI businesses, he said, adding that the Governmentshould have economic solutions or technical barriers in place to stipulate whatFDI firms are permitted to do for the sector to ensure energy security.

The technical barriers could includenon-tariff measures, requirements on standards or a distribution system.

The chairman also shared experience fromthe retail sector, citied by the tuoitre.vn newspaper. He stated that thelack of strict barriers had led to FDI businesses dominating the market.

The Government, therefore, should havesolutions to resolve difficulties faced by Binh Son Refinery and Nghi SonRefinery to improve the competitiveness of the local petroleum sector. Nghi SonRefinery, which is meant to become operational in 2018, in particular, couldsufficiently meet Vietnam’s petrol demand.

However, the issue was whether theproduction cost of local refineries could compete with foreign firms, thechairman told the newspaper.

According to tradeaccords Vietnam has joined, import duty on fuel will be zero by 2024. Rueproposed the adjustment of special consumption tax to avoid a serious Statebudget deficit. Specifically, environmental protection tax should be adjustedthis year, followed by special consumption tax next year and VAT in the 2020-22period.

Currently, income fromfuel import tax accounts for seven percent of the State budget, he said, addingthat agencies should carefully prepare a roadmap for raising other taxes toensure the harmony of State budget income.

The association saidfees and taxes make up more than 50 percent of the fuel price. Therefore,cutting fuel import tax to zero percent necessitates increasing other taxes tomake up for the lost income.

“Once the import duty is cut to zero, we should increase othertaxes to make up for the loss. It is necessary to ensure that the total tax sum accounts forhalf the retail fuel price. As the import tariff moves down to zero, othertaxes must be raised to offset the shortfall. Paying higher taxes is how every citizenshows his/her responsibility to the country,” hesaid.

In fact, the Ministry of Finance has several times indicated itsintention to raise environment tax for fuels from the current 4,000 VND perlitre to 8,000 VND. A92gasoline, the country’s most widely used fuel, currently sells for 17,063 perlitre VND, including the 3,000 VND per litre environment tax. If the new taxrate is approved, the price would rise to more than 22,000 VND per litre,analysts calculated.

The association isstrongly supporting the proposal on so-called environment tax hike policy.However, the public is not.

Bui Danh Lien, chairman of the Hanoi Transport Association, saida shortfall in the State budget required solutions other than hikingenvironment tax, which is not used for the benefit of the environment. Hebelieved there were many solutions to the budget shortfall with the mostimportant one being to cut public spending.

Sharing his ideas, Truong Dinh Tuyen, former minister of industry and trade, saidincreasing taxes was not the right solution.

Tuyen said increasing taxes might help reduce losses to theState revenue in the short-term but was not a sustainable solution.

“We should try instead to cut taxes and assist local businessesin reducing input cost, which will help boost their performance,” he said,adding that what’s more important is to create a competitive fuel market thatprovides the best retail prices for consumers.-VNA