MOF has warned that under international integration, tariff on ASEAN imports will be cut to zero percent, which will create challenges for domestic automobile enterprises.
The ministry also pointed out that the tax cut under the framework of free trade agreements (FTAs) has caused a problem that the tariffs on CBU (complete built unit) imports are equal or even lower than the tariffs on car part imports. Meanwhile, in principle, car part imports must bear lower tax rates so as to encourage enterprises to make cars domestically.
MOF admitted that the unreasonable tax scheme will ‘discourage the local automobile production’. Therefore, it believes that amending the tax policies on car parts for less than 2,000 cc cars is a necessity.
MOF plans to slash the import tariff on engines from South Korea from 20 percent to 3 percent, which is equal to the tax rate it committed to in the Vietnam-Japan FTA.
As for other sets of parts, it wants to speed up the tax cut roadmap it has promised with Japan and South Korea to 5 percent from 2016 instead of 12-20 percent as committed before.
Meanwhile, electric lighters, another part of under 2,000 cc cars, may see the import tariff cut to zero percent by 2016.
The import tax cuts have also been suggested for five categories of truck parts. Diesel engine, gearbox and interior products from South Korea and Japan may be taxed zero percent p from 2016 instead of 2018-2019 as initially planned.
An analyst commented that MOF, with its tentative move of slashing import tariffs on car parts, shows it wants to protect local production.
Prior to that, MOF decided to change the way of calculating luxury tax on car imports. With the new way, import car dealers say, import cars would be more expensive.
Whether to keep protecting local production is a question automobile joint ventures and people have raised to the government many times.
While Vietnamese people criticize ministries for high import tax rates aiming to protect the local production which creates high car prices, automobile manufacturers complain tax policies are not high enough to encourage their production.
The MOF’s move has not been welcomed by many experts, who believe that Vietnam, having failed to implement the automobile industry development strategy in the last 20 years, should give up the plan to gather strength on more important things.