Starting January 1 the tax on petrol will increase from VND3,000 (13 cents) per liter to VND4,000 (17 cents), and on diesel from VND1,500 to VND2,000.

The tax on kerosene will go up from VND300 to VND1,000, and on fuel oil and lubricants from VND900 (3.9 cents) to VND2,000 (8.6 cents).

The hike is scheduled for next year so that the government’s goal to keep inflation under 4 percent will be guaranteed.

Speaking at the meeting, the chairman of the NA Committee on Foreign Affairs expressed concern that the tax hike would have an inflationary effect.

But Nguyen Van Hai, chairman of the NA Budget Finance Committee, said the new rate is still only 39 percent on fuel base price, which is lower than the rate in neighboring countries such as Cambodia where it is 49 percent, China (52 percent) and Laos (56.5 percent).

The new tax would only increase transport cost by 0.83 percent in the first three months, while power prices would basically be unaffected, he said.

NA vice chairman Phung Quoc Hien said the hike would bring VND15.7 trillion ($676.8 million) each year to the government’s coffers, and this would be used to deal with environmental issues.

House chairwoman Nguyen Thi Kim Ngan said that the money must be used to protect the environment.

“That way, people will see that the money is not spent for other purposes.”

Fuel prices in Vietnam are still lower than in 120 other economies in the world, according to the Ministry of Finance.

As Southeast Asia’s fastest-growing economy, Vietnam is facing an air pollution problem. The capital Hanoi enjoyed little more than one month of clean air last year, according to a January report by the Green Innovation and Development Center.

Fuel is a major source of revenue for Vietnam. Import tariffs from fuel, which are paid by local businesses, now account for around 7 percent of the state's income, according to the petroleum association.

Vietnam gained VND42.4 trillion in revenue from environmental protection taxes in 2016, jumping nearly 57 percent from 2015.

During the same period, spending on environmental protection reached just VND12.3 trillion, accounting for 29 percent of the tax revenue.

Source: VNE