The Ministry of Finance has turned down a request to remove import duties on jet fuel by Vietnam Airlines and Jetstar Pacific, even after the local carriers said their imput costs have surged sharply this year.
Import tariffs on fuel products have to be based on various factors, including prices of locally produced fuel and the fund for stabilizing fuel prices, and thus cannot be scrapped now, news website VietNamNet reported, citing the ministry's decision.
The ministry said it will instead consider cutting the import tax on jet fuel to as low as 7 percent to ease financial difficulties for local airlines.
Under the plan, if jet fuel prices hit US$105 per barrel, import duties will fall to 7 percent. Lower prices will bring higher tax rates, of up to 40 percent.
Vietnam currently imposes an import tax of 12 percent on jet fuel, alongside an environmental tax of VND1,000 per liter and a 10 percent value added tax.
Fuel costs accounted for 42 pecent of total expenditures at budget carrier Jetstar Pacific last year, while the ratio was 58 percent at state-owned Vietnam Airlines, according to VietNamNet.
Vietnam Airlines said in May that fuel prices averaged $133.26 per barrel in the first four months, 7.44 percent higher than the projections used to calculate airfares earlier.
With air transportation in a downturn, an airfare hike is not a good option now, the carrier said, noting that a zero percent tax rate on imported fuel would help it reduce costs.
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