Vietnam to change tax, customs policy to encourage automobile industry

Developing an automobile industry is a part of the strategy to turn Vietnam into a modern and industrialized country by 2030. More preferences for the industry will be offered in the time to come.

ASEAN top 3 is the goal

Resolution 23-NQ/TW dated March 23, 2018 of the Party Politburo sets the goal that Vietnam would complete the task of industrialization and modernization, basically becoming a modern industrial country, and included in the ASEAN top 3.

Vietnam to change tax, customs policy to encourage automobile industry

To reach the goal, the resolution pointed out that priority should be given to some mechanical industries such as automobile, agricultural machines, construction equipment, industrial equipment, electrical equipment, and medical equipment.

It is necessary to give support to develop suppliers in priority industries, which is the core of the policy on supporting industry development.

As such, automobile and automobile supporting industries will be prioritized to develop from now to 2030.

Vietnam’s automobile industry is still very small. A report from the Ministry of Industry and Trade (MOIT) found that automobile output in 2019 totallef 281,606 products, much lower than the total capacity of 800,000 products. The figure was small compared with Thailand (2 million cars a year) and Indonesia (1.2 million).

Low output

Local supporting industries are also small with 276 car part manufacturers who provide products to 40 automobile assemblers. Meanwhile, Thailand has more than 2,000 and Indonesia 800.

Experts pointed out that in order to develop the automobile industry, it is necessary to develop supporting industries. But the supporting industries are weak in competitiveness.

A representative of Toyota Vietnam said at a seminar on the role of tax and customs policies in the automobile industry on November 3 that the manufacturer can buy a fuel tank cap at $1.5 per product, while a Vietnamese vendor offered the product at $3.8.

After helping the vendor cut down unnecessary costs and sending staff to the vendor’s production facility to support the production process, the price was lowered to $2.5. However, the price is still $1 higher than the products from Thailand.

Pham Van Tuan, general director of Eco Vietnam, also said that enterprises have import materials at high prices because of small orders. The expenses on materials account for 60-70 percent of production costs.

The logistics cost in Vietnam is also high, accounting for 8-10 percent, while bank loan interest and other expense items account for 5-7 percent. Therefore, it is difficult to compete with imported car parts from Thailand which enjoy a preferential tariff of zero percent.

 
Resolution 23-NQ/TW dated March 23, 2018 of the Party Politburo sets the goal that Vietnam would complete the task of industrialization and modernization, basically becoming a modern industrial country, and included in the ASEAN top 3.

Sharing the same view, a representative from Hanoi Plastics said the production of car parts does not bring high profits. In order to make higher profit, enterprises should produce products in large quantities.

Contradictory policies

To develop supporting industries, the automobile industry needs to have large output. To encourage demand in the context of the people’s low incomes, it is necessary to slash taxes and fees, which helps reduce car prices.

Le Duong Quang, chair of the Vietnam Supporting Industries Association, said that tax policy is an important tool to develop the auto industry and supporting industries. Imposing high luxury taxes on cars will not encourage the consumption of cars.

“I was astonished when hearing that there are 500,000 cars of different kinds in Vientiane. Hanoi has 600,000 cars. Hanoi’s population and income per capita is higher than Vientiane's,” he said, adding that the tax policy in Laos encourages the consumption of cars.

Quang saud that the government and appropriate agencies are still unsure about the policies for the auto industry. Vietnam wants to develop the industry, but its tax policies clearly discourage consumption.

According to the General Department of Customs (GDC), under the zero percent preferential import tariff program in accordance with Decree 125, 13 enterprises have met the requirements to receive the preferences of the program and have received tax refunds of VND9.5 trillion since late 2017.

According to the Ministry of Finance, enterprises receive tax refunds, but make great contributions to the state budget collections. In 2018, for example, four manufacturers, Toyota Vietnam, TC Motor, Truong Hai and Ford, paid VND7.3 trillion more in taxes than in 2017. Meanwhile, the tax amount paid in 2019 was VND4 trillion higher than 2018.

Analysts said the zero percent preferential tariff on car part imports helps reduce expenses on car parts bought from non-ASEAN countries and the production cost of some domestically assembled models by 3-5 percent, thus allowing lower selling prices.

If the state continues reducing taxes and fees, this would help increase car output and help develop the automobile and supporting industries, which would lead to higher state budget collections. 

Tran Thuy

The last chance for Vietnam’s automobile industry

The last chance for Vietnam’s automobile industry

The Ministry of Planning and Investment (MPI) is compiling a plan to develop the automobile industry in the post-Covid-19 period with many new solutions.

Gov’t support aids automobile industry

Gov’t support aids automobile industry

The domestic automobile industry was forecast to thrive, given the Government’s supports in tax policies for imported automobile components coupled with the increasing income of citizens.

 
 

Other News

.
Diplomatic efforts affirm Vietnam’s position in international arena amid COVID-19
Diplomatic efforts affirm Vietnam’s position in international arena amid COVID-19
FEATUREicon  26/12/2020 

The diplomatic sector has continued to affirm Vietnam’s position in the international arena amid the global impact of the COVID-19 pandemic, Deputy Prime Minister and Foreign Minister Pham Binh Minh has said.

Deputy Minister of Defense reviews VN’s defense strategy in the new situation
Deputy Minister of Defense reviews VN’s defense strategy in the new situation
FEATUREicon  25/12/2020 

Deputy Minister of Defense, Senior Lieutenant General Nguyen Chi Vinh reviews Vietnam’s military and defense hallmarks in 2020.

Prime Minister: "Digital technology enterprises must pioneer in innovation"
Prime Minister: "Digital technology enterprises must pioneer in innovation"
FEATUREicon  26/12/2020 

At the National Forum on Developing Digital Technology Businesses 2020, Deputy Minister of Information and Communications Phan Tam read a letter from Prime Minister Nguyen Xuan Phuc to the Vietnamese digital technology business community.

“Make in Vietnam” and "tell your Vietnamese story":  MIC Minister
“Make in Vietnam” and "tell your Vietnamese story": MIC Minister
FEATUREicon  25/12/2020 

Minister of Information and Communications (MIC) Nguyen Manh Hung has called on every Vietnamese citizen and enterprise to take part in “Make in Vietnam” and tell their own Vietnamese story.

Central bank’s policies conductive to FDI, economic resilience: HSBC
Central bank’s policies conductive to FDI, economic resilience: HSBC
FEATUREicon  26/12/2020 

The central bank of Vietnam has taken both monetary and fiscal policies all together to ensure macro and social stability.

Why Vietnam’s outlook for 2021 looks bright?
Why Vietnam’s outlook for 2021 looks bright?
FEATUREicon  25/12/2020 

The country is projected to grow 6.8% in 2021 on condition that the pandemic be contained.

Vietnam's top 10 science and technology events in 2020
Vietnam's top 10 science and technology events in 2020
FEATUREicon  25/12/2020 

The 10 events were voted on by 60 science and technology journalists at 25 media agencies throughout the country.

Outstanding events in Vietnam in 2020
Outstanding events in Vietnam in 2020
FEATUREicon  25/12/2020 

Here are outstanding events in Vietnam in 2020.

Outstanding economic events of Vietnam in 2020
Outstanding economic events of Vietnam in 2020
FEATUREicon  24/12/2020 

Vietnam among very few countries to post GDP growth rate of 2.5-3 percent, and the signing of RCEP agreement in 2020 when Vietnam assumes ASEAN Chairmanship are among the top 10 domestic economic events in the year.

Minister of Health says local scientists are carefully monitoring new mutant coronavirus strain
Minister of Health says local scientists are carefully monitoring new mutant coronavirus strain
FEATUREicon  25/12/2020 

The new mutant coronavirus strain found in the UK can spread more rapidly, raising concern about the effect of vaccines. Vietnam plans to implement gene sequencing of the virus sample.

Hanoi’s landmarks stand the tests of time - The holly relics
Hanoi’s landmarks stand the tests of time - The holly relics
FEATUREicon  26/12/2020 

Founded over thousand years ago, Hanoi capital grew from swamplands into the charismatic city as it is today with hundreds of historical architecture works.

Local technology enterprises must regain the market
Local technology enterprises must regain the market
FEATUREicon  24/12/2020 

"Vietnam's overall economic growth rate is below 10%. The growth target for digital technology enterprise should be set at 15-20% and even more," said Deputy PM Vu Duc Dam at the National Forum for Developing Technology Enterprises.

Silent, painful reforms of the tax sector show positive results
Silent, painful reforms of the tax sector show positive results
FEATUREicon  23/12/2020 

The tax sector’s painful, quiet reforms have helped increase Vietnam’s position in the global business climate report.

2020 – the year of Vietnam’s national digital transformation strategy
2020 – the year of Vietnam’s national digital transformation strategy
FEATUREicon  25/12/2020 

The government considers the development of telecommunication infrastructure and IT as one of its top priorities.

Young H’mong man opens homestay on Ha Giang plateau
Young H’mong man opens homestay on Ha Giang plateau
FEATUREicon  26/12/2020 

With just VND500,000, Sung Mi Phin went from Ha Giang to Sa Pa in Lao Cai to study English and learn how to make money from tourism.

Textbook changes – a test of education reform
Textbook changes – a test of education reform
FEATUREicon  24/12/2020 

Minister of Education and Training Phung Xuan Nha noted before the National Assembly that the content of Canh Dieu (Kite), the textbook for first graders, is “not appropriate".

2020 - year of opening the door to the world
2020 - year of opening the door to the world
FEATUREicon  22/12/2020 

Vietnam's export growth this year has been impressive thanks to the signing and approving of many free trade agreements (FTAs), reflecting the success of the country's steady and flexible international integration process.

Do the Vietnamese still have a chance?
Do the Vietnamese still have a chance?
FEATUREicon  23/12/2020 

If you want to get over the rapids, you must first get off the boat. Will the next decade reach the goal of industrialization without success?

Unfinished dream to become a 'dragon'
Unfinished dream to become a 'dragon'
FEATUREicon  22/12/2020 

Vietnam’s industries, especially the processing and manufacturing industry, are developing. 

Vietnamese spend $10 billion on illegal football betting
Vietnamese spend $10 billion on illegal football betting
FEATUREicon  21/12/2020 

Ladbrokes, a British betting and gambling company, estimates that Vietnamese illegal football betting in Vietnam is worth 3-5 percent GDP (gross domestic product), or $10 billion a year.

 
 
 
Leave your comment on an article

OR QUICK LOGIN