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Dung Quat Oil Refinery in danger of closing

Released at: 15:59, 14/04/2015

Dung Quat Oil Refinery in danger of closing

The refinery is facing difficulties due to discrepancies in import tax rates in Vietnam compared to the rest of the region.

According to the Chairman of Binh Son Refining and Petrochemical Co., Ltd. (BSR), Mr. Nguyen Hoai Giang, the firm has asked the government to consider adjusting to a more appropriate import tax on petrol to compete in domestic markets.

"If the preferential tariff on petrol is applied, the product of Dung Quat will be more expensive compared to imported gasoline,” Mr. Giang said. “We will face struggles to sell to wholesalers."

Due to a Ministry of Finance Circular dated October 26, 2010, the import tax of petroleum code HS 2710 is only 20 per cent from 2015 to 2018. Diesel fuel for cars coded HS 27101971 and 27101972 will have import tax of 5 per cent which will decrease to 0 per cent in the next three years. Oil with code HS27101979 will have tax exemption until 2018.

Meanwhile, the incentive of import tax for Dung Quat Refinery is 35 per cent for gasoline, 25 per cent for Jet A1 and 30 per cent for diesel, numbers much higher than those from other ASEAN countries. Therefore, the firm is finding it difficult to compete in the domestic market.

In a document sent to the Ministry of Finance, Petrol Vietnam stated that if BSR was allowed to apply a special import duty rate to products from ASEAN countries, the budget of the Dung Quat refinery would be significantly reduced. Specifically, it would go down by more than VND14.3 trillion ($0.6 billion) and VND16.2 trillion ($0.7 billion) per year in the next three years. 

Commenting on the impact of tax rates, a leader of the BSR said that if the policy of the Ministry of Finance issued for the Dung Quat Oil Refinery is applied, it will be in danger of closing due to the defection of its partners based on the higher price compared to products from the ASEAN countries. This person suggested a review and adjustment of appropriate tax policy. 

Hoai An

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