spice
03-27-2008, 10:21 AM
Imported automobiles like these will soon attract higher tariffs but not auto parts
The import tax on new cars will jump on March 26 to 70 percent from the current level of 60 percent, under a Ministry of Finance decision signed on March 11.
Until the country joined the World Trade Organization (WTO) last January, the tariff was 90 percent.
http://www.thanhniennews.com/images/newsimages/xe-080-08.jpg
As part of its commitments to the WTO and other trade partners, Vietnam agreed to gradually lower tariffs on imported automobiles.
http://www.autonet.com.vn/Library/Images/10/2008/T03/Sauvolang/KiaPicanto/IMG_4856-copy.jpg
Many doubt the wisdom of the latest decision to subject imported automobiles to a higher tax while making no change to the import tax on auto parts.
Some say discouraging people from buying imported new automobiles, as well as auto parts – the mainstay of the assembly-based local auto industry – would be the best way to ease traffic congestion.
But because traffic gridlock occurs only in Hanoi and Ho Chi Minh City, raising the tax on imported cars will make all Vietnamese consumers pay for a problem confined to just two cities.
A better solution to the traffic woes would be to impose a surcharge on automobile drivers in Hanoi and HCMC.
Many criticize the government for failing to consider this option.
The hike in import duties is at cross-purposes to the government’s aim of discouraging imports and thus reducing the trade deficit.
Instead of buying imported new automobiles, Vietnamese consumers will simply buy locally assembled cars made from imported parts.
The Ministry of Finance is yet to outline when and how the country will reduce taxes on imported automobiles to honor its WTO pledge.
Many say the ministry is trying to protect the 16-member Vietnam Automobile Manufacturers’ Association (VAMA) because foreknowledge of a tax cut plan would cause consumers to postpone buying until the cuts took effect, reducing current automobile demand and forcing local manufacturers to lower prices.
Long before the recent new automobile tax increase, however, local manufacturers had been benefiting from other preferential tax policies.
Until 2003, foreign new automobiles attracted a 100 percent import tax, an 80 percent special consumption tax, as well as a 10 percent value added tax (VAT).
Meanwhile, local manufacturers who imported auto parts only had to pay a 30 percent tax on parts and a 10-percent VAT.
To be eligible for this policy, VAMA had to promise to gradually develop a local auto industry.
Yet a self-sustained domestic industry is nowhere in sight.
VAMA’s accounts reveal that even during the pre-2003 period, its members reported profit accounting for only about 11 to 23 percent of their revenues.
Considering locally-assembled automobiles were sold at roughly the same prices as imported vehicles, though the local cars attracted much lower taxes than the foreign ones, many accused local manufacturers of pocketing the difference.
Reported by Hai Van
The import tax on new cars will jump on March 26 to 70 percent from the current level of 60 percent, under a Ministry of Finance decision signed on March 11.
Until the country joined the World Trade Organization (WTO) last January, the tariff was 90 percent.
http://www.thanhniennews.com/images/newsimages/xe-080-08.jpg
As part of its commitments to the WTO and other trade partners, Vietnam agreed to gradually lower tariffs on imported automobiles.
http://www.autonet.com.vn/Library/Images/10/2008/T03/Sauvolang/KiaPicanto/IMG_4856-copy.jpg
Many doubt the wisdom of the latest decision to subject imported automobiles to a higher tax while making no change to the import tax on auto parts.
Some say discouraging people from buying imported new automobiles, as well as auto parts – the mainstay of the assembly-based local auto industry – would be the best way to ease traffic congestion.
But because traffic gridlock occurs only in Hanoi and Ho Chi Minh City, raising the tax on imported cars will make all Vietnamese consumers pay for a problem confined to just two cities.
A better solution to the traffic woes would be to impose a surcharge on automobile drivers in Hanoi and HCMC.
Many criticize the government for failing to consider this option.
The hike in import duties is at cross-purposes to the government’s aim of discouraging imports and thus reducing the trade deficit.
Instead of buying imported new automobiles, Vietnamese consumers will simply buy locally assembled cars made from imported parts.
The Ministry of Finance is yet to outline when and how the country will reduce taxes on imported automobiles to honor its WTO pledge.
Many say the ministry is trying to protect the 16-member Vietnam Automobile Manufacturers’ Association (VAMA) because foreknowledge of a tax cut plan would cause consumers to postpone buying until the cuts took effect, reducing current automobile demand and forcing local manufacturers to lower prices.
Long before the recent new automobile tax increase, however, local manufacturers had been benefiting from other preferential tax policies.
Until 2003, foreign new automobiles attracted a 100 percent import tax, an 80 percent special consumption tax, as well as a 10 percent value added tax (VAT).
Meanwhile, local manufacturers who imported auto parts only had to pay a 30 percent tax on parts and a 10-percent VAT.
To be eligible for this policy, VAMA had to promise to gradually develop a local auto industry.
Yet a self-sustained domestic industry is nowhere in sight.
VAMA’s accounts reveal that even during the pre-2003 period, its members reported profit accounting for only about 11 to 23 percent of their revenues.
Considering locally-assembled automobiles were sold at roughly the same prices as imported vehicles, though the local cars attracted much lower taxes than the foreign ones, many accused local manufacturers of pocketing the difference.
Reported by Hai Van