The ministry is seeking government approval to lower the jet fuel tax by 50% for the whole of 2022, compared with the current 30% cut, which is due to expire at the end of this year.
"It's necessary to continue cutting environment tax in 2022 to help local airlines weather the impact of the coronavirus pandemic," it said in a statement.
"Jet fuel tax will be at 1,500 dong ($0.0662) per litre after the cut."
Vietnam imposed tight border controls at the start of the pandemic and suspended almost all inbound flights to keep out COVID-19, which dealt a blow to its airline industry.
Official data showed the industry suffered a loss of 16 trillion dong ($705.78 million) in 2020, when Vietnam was only mildly affected by the virus.
This year's loss is expected to be greater as domestic flights were halted for nearly six months while movement curbs were imposed to contain the country's worst outbreak so far.
According to the ministry, environment tax reduction would help the aviation industry to overcome difficulties, especially when the country was seeking to resume international flights next year.
($1 = 22,670 dong)
(Editing by Martin Petty)