VietNamNet Bridge – The Ministry of Finance (MOF) has suggested to reducing the car ownership registration tax and delay the plan to collect the kind of fee aimed in restricting private vehicles in circulation. The news has raised the hope that the car market would warm up early the next year.

Suggestions believed to help warm up market

The suggestions have made to the government as a part of the plan to help enterprises ease their difficulties in 2013.

Regarding the ownership registration tax, MOF has suggested the tax rate of 10 percent for the up-to-10-seat cars registered for the first time. Local authorities can apply higher tax rates, but the rates could be 50 percent higher than the suggested rate at maximum.

As for the vehicles registered for the second and subsequent time, the fee would be no more than two percent and the single level would be applied nationwide.

MOF has also proposed not to collect the fee aiming to restrict the number of private vehicles, the main reason behind the sharp fall of the car market in 2012.

However, it’s still unclear if this kind of fee is removed for ever, or the fee is exempted only in 2013. This would be wonderful if the former scenario is the answer.

However, if the latter is the true answer, then the MOF’s suggested plan has not much significance, because the Ministry of Transport said in 2012 already that the plan would be implemented after some more years, when everything is ready.

In principle, the car ownership registration tax reduction to 10 percent would encourage people to buy cars. However, everything would still depend on the local authorities’ decisions. At present, except Hanoi and HCM City, which impose 15 percent, the 10 percent tax rate has been applied in all other localities.

There are some possible scenarios. If both Hanoi and HCM City reduces the ownership registration tax rate to 10 percent, this would have big impacts on the car sales, because 70 percent of cars are consumed in the two big cities. However, the impacts would be weaker if HCM City maintains the 15 percent tax rate and only Hanoi reduces the rate to 10 percent.

Auto industry needs long term stability

In general, it takes a long time to see a proposed policy come into reality. However, analysts believe that the proposal would be approved soon, because this is a part of the group of solutions to rescue the national economy that needs to be implemented urgently.

Especially, some analysts think that the tax reduction would be announced in some days, which means that people would have the opportunities to buy cars to drive on Tet days which would come in February 2013.

In 2012, the Vietnam Automobile Manufacturers’ Association VAMA sent a petition to competent agencies, asking to rescue the car market by stating that the government would not plan any other kinds of fees on cars.

The manufacturers proposed to remove the kind of fee aimed in restricting private vehicles in circulation and halt the collection of road maintenance fees, so as to help ease difficulties for both automobile manufacturers and consumers.

They also proposed to reduce the car ownership registration tax to five percent, which would be applied in all localities in Vietnam.

However, competent agencies kept quiet to the proposals. Nothing was changed except the delay of the road maintenance fee collection to January 1, 2013.

Tran Thuy