A view of Dung Quat Oil Refinery. — Photo bsr.com.vn

HA NOI (Biz Hub) — The tax reduction for Dung Quat Oil Refinery is necessary and reasonable to ensure equal principles between local and imported products, Do Hoang Anh Tuan, the deputy minister of finance, said.

"The reduction would also follow the reasonable protection level under international commitments when Viet Nam joins the trade pacts," Tuan said.

Previously, the Binh Son Refining and Petrochemical Co (BSR), which operates and manages Dung Quat, was seeking approval to lower tax rates because of a lack of competitiveness against imported fuels as well as untie its difficulties.

The diesel and mazut import taxes from ASEAN countries were cut from 20 per cent to 10 per cent since the beginning of this year in accordance with the ASEAN Trade in Goods Agreement (ATIGA). However, products from Dung Quat are still subject to an import tax of 20 per cent, forcing a number of local businesses that bought petroleum from Dung Quat to choose other imported sources.

The deputy minister told the media last week that the consumption of the refinery has faced with difficulties due to the plunging price in the world oil market.

In addition, under the Free Trade Agreement (FTAs) with South Korea, which was signed in May 2015, Viet Nam reduced the import tariff on gasoline from South Korea to 10 per cent, from 20 per cent, effective December 20, 2015.

He said that there was a big difference between the normal imported taxes and preferential taxes under FTAs.

The preferential policies for the Dung Quat Oil Refinery including corporate income tax and investment are under the government's regulations.

This is the reason that there are no special favours for the refinery, but it is equal to other projects, he said.

The ministry would submit to the Government to review suitable financial mechanism in the market mechanism and ensuring equality between domestic and foreign businesses.

Specifically, the ministry would remove the cash subsidy mechanism for BSR if the imported tax is lower than 7 per cent.

Currently, under the finance ministry's instructions, the calculation for import duty of petroleum products is under most-favoured nation (MFN) status.

The Ministry of Industry and Trade yesterday sent a press release saying that it has co-operated with the finance ministry to have financial solutions to resolve the imported tax reduction under FTA road map following international integration commitments to ensure benefits of the government, businesses, petroleum production and consumers.

However, the ministry has not provided a road map to narrow down the difference of imported taxes between FTAs and MFN in the calculation of the basic price of petroleum. — VNS