VietNamNet Bridge – The Ministry of Industry and Trade has proposed reducing special consumption tax, import tariffs and fees for completely built-up (CBU) automobiles and auto parts in 2015-2018, but the Ministry of Finance has called for a second thought.

Customers scrutinize luxury cars on display at an auto exhibition in this file photo. According to the General Department of Customs, CBU imports reach 71,045 units worth nearly US$1.6 billion last year, up 102% in volume and 119% in value over 2013

The industry ministry made the proposal at a meeting with Deputy Prime Minister Hoang Trung Hai and representatives of the Ministry of Finance. The meeting was organized to discuss the implementation of the Government’s strategy to develop the automobile industry.

The ministries had different views on tax policy changes at the meeting as the proposal of the industry ministry, if approved, would affect State budget collections and the development of the local auto industry, which has been protected for years.

Deputy Minister of Industry and Trade Cao Quoc Hung presented proposed changes to the special consumption tax and import duties on CBU vehicles and import tariffs on auto components between now and 2018, as well as fee collections in this field.

A source from the meeting told the Daily that the industry ministry wants the special consumption and import taxes on CBU units lowered, except for luxury vehicles whose import is restricted.

For example, the ministry suggested the special consumption tax for cars of 1.5 liters to be cut to 35% from the current 45% and that for cars of 3.0 liters to be raised by 10 percentage points to 70% from next year.

The revised Law on Special Consumption Tax, effective from June 1 next year, imposes a tax of 60% on autos of 3.0 liters.

However, the Ministry of Finance said the industry ministry’s proposal for tax reductions should be weighed as the latter wanted tax cuts to beef up auto sales but the suggestion would make inroads into State budget collections and pile pressure on transport infrastructure.

Under the road map of the ASEAN Free Trade Area (AFTA), the duty on CBU autos of under 10 seats imported into Vietnam from other ASEAN countries has dropped to 50% this year from 60% in 2013 and 50% early last year. The rate will go down to 40% next year, 30% in the following year and 0% in 2018.

Tariff exemptions are applied to around 90% of nearly 10,000 groups of items imported from ASEAN from this year and only 7% will have import tax cut gradually to 0% by 2018, including CBU units.

According to the General Department of Customs, Vietnam imported 71,045 CBU autos worth nearly US$1.6 billion last year, jumping 102% in volume and 119% in value compared to 2013.

Meanwhile, auto enterprises in Vietnam can manufacture and assemble 640,000 vehicles per year with half of them cars of under nine seats. The total volume is just one-sixth of their designed capacity.

Many auto joint ventures have imported CBU vehicles since 2011 to meet rising demand for imported autos.

Speaking at the meeting, Deputy PM Hai urged relevant ministries and agencies to suggest clear policies for taxes, fees and loans applicable to the automobile industry to help manufacturers and traders map out long-term business plans.

He was quoted by the Government’s portal as insisting that a detailed mechanism for taxes and fees is important to the successful implementation of the automobile development strategy and investment projects by enterprises in the sector.

He told the ministries of industry-trade and finance to closely collaborate to review and propose tax and fee changes for the automobile industry in a way that ensures policy stability and Vietnam’s and commitments to free trade agreements.  

Last July, the Government issued a decision endorsing the automobile development strategy until 2025 with a vision toward 2035, with cars of no more than nine seats prioritized.

SGT