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August 21, 2008

Vietnam mulls steep hike in taxes on mining, gas, coal
Vietnam's Finance Ministry has proposed steep tax hikes on domestic production of minerals, metals, natural gas, coal and gemstones to help protect the environment and prevent unauthorised mining, Reuters reported.

Foreign firms operating, or planning to invest in Vietnam's energy and steel sectors that could be exposed to the tax include BP Plc, Gazprom and Tata Steel.

Vietnam vies with the United States as the world's seventh biggest exporter of thermal coal and is Southeast Asia's third-largest producer of crude oil.

"Raising the natural resource tax on minerals will contribute to limiting the widespread exploitation and raising revenues for provincial budget to help improve the environment," the ministry said in a statement seen on Wednesday.

Taxes on mining manganese, steel, lead, zinc, copper and tin would be raised to between 10 and 30 percent, from 1-5 percent now, the ministry said in its draft proposal obtained by Reuters.

Natural gas production would be taxed at 6-25 percent, on par with the current tax on crude oil and up from zero to 10 percent now, while coal mining would be taxed at between 5-20 percent, from 1-3 percent at present.

Taxes on mining of stone construction material, soil and sand would be raised to 5-10 percent from 1-5 percent, it said. The ministry also proposed a tax of 5 percent to 20 percent for gemstone production, up from 3-8 percent.

The Finance Ministry said it has sent the proposal on the tax changes to relevant authorities and asked them to give opinions by Aug 29 before the plan is submitted to the government. It did not say when the new taxes would be approved.

At a minimum mineral tax rate of 10 percent, Vietnam would be able to collect taxes of 21.5 trillion dong per year ($1.3 billion), the ministry said . Vietnam's natural resource tax collection last year dropped 7.6 percent to 21.4 trillion dong, the Finance Ministry said.

Vietnam mainly exports its minerals to neighbouring China and Japan.

Facing rising domestic demand amid economic growth of 7 percent and aiming to prevent its natural resources from running out quickly, the Vietnamese government has moved to curb the export of several commodities.

On April 22 it raised the export tax on coal to 15 percent from 10 percent and also doubled that on crude oil to 8 percent.

In February the government said Vietnam will stop exporting titanium ore from 2009 to save it for domestic processing.

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