VietNamNet Bridge - Under the latest version of the draft luxury tax law, cars will not be priced lower before 2018. 

 

Under the latest version of the draft luxury tax law, cars will not be priced lower before 2018.

Law compilers have submitted to the National Assembly’s Standing Committee the draft law on amending provisions of the Special Consumption Tax.

The luxury tax rates would not decrease sharply on cars with a cylinder capacity of less than 2000 cc as initially expected.

Under the latest version of the draft law, the cars with the cylinder capacity of 1,500 cc and lower would be taxed 40 percent in luxury tax, or 5 percent lower than now, from July 1, 2016. 

Meanwhile, the tax rate of 35 percent, or 10 percent lower than currently, would be applied from January 1, 2018.

The luxury tax rates would not decrease sharply on cars with a cylinder capacity of less than 2000 cc as initially expected.

The cars with a cylinder capacity of 1,500-2,000 cc would be taxed 40 percent from January 1, 2018, or 5 percent lower.

The same tax rate of 45 percent would be applied to 2,000-2,500 cc cars.

Meanwhile, the tax rate of 55 percent and 60 percent would be applied to 2,500-3,000 cc from July 1, 2016 and January 1, 2018, respectively.

In an effort to encourage small size cars, the Ministry of Finance (MOF) previously designed sharper tax reductions for under 2,000 cc cars (25 percent tax for less than 1,000 cc cars). 

However, the ministry has decided to remove the planned tax incentives after realizing that the low tax rates would encourage imports (under 1,000 cc cars are mostly imports).

The Vietnam Automobile Manufacturers Association (VAMA) has agreed with the latest version of the luxury tax draft law. 

With the luxury tax on CBU (complete built unit) imports from ASEAN going down to zero percent by 2018, if Vietnam plans sharp luxury tax reductions, this would lead to the sharp car price decreases. 

If so, the market would be hot, while imported cars would enjoy big advantages and the state budget’s revenue would decrease.

Therefore, the mild 5-10 percent tax cuts would be reasonable.

The draft version is scheduled to be submitted to the National Assembly for approval in the upcoming National Assembly’s session, slated for March 2016.

With the planned tax cut roadmap, car prices would not go down prior to 2018.

Analysts said if the suggested roadmap gets approval, only some car models would see slight price decreases. 

These include domestically made models such as Kia Morning, Chevrolet Spark, Fiesta Ecoboost and Suzuki Swift, and CBU imports such as Toyota Yaris, Mitsubishi Mirage. The models would see the import tariff cut by 10 percent and the luxury tax down by 5 percent.

Tran Thuy