New Taxes to Drive Car Prices down

New Taxes to Drive Car Prices down

Car prices in Vietnam are projected to be lower after the government approved new tariffs on imported spare parts and components proposed by the ministries of industry and finance.

The Ministry of Finance said that if new tariffs were passed, they would be applied next month.

Mr. Quach Duc Phap, head of the Ministry of Finance’s Tax Policy Department, said components that local enterprises can produce will be imposed the highest tariffs at 30 per cent. The new tariff rates will be 30 per cent, 25 per cent, 20 per cent, 15 per cent, 10 per cent and 5 per cent.

Batteries, seats and tyres will be subjected 30 per cent import taxes while transmission, bodywork and chassis are 15-20 per cent and others 5-10 per cent.

In the meantime, the Ministry of Industry has asked the government to submit a proposal on applying a common special consumption tax to both locally made and imported vehicles to the National Assembly, Vietnam’s legislature.

Currently, the special consumption tax is 40 per cent on locally assembled cars and 80 per cent for imported ones.

Several carmakers and vehicle trading firms said this move would drive car prices down.

“If the 40 per cent special consumption tax is applied on imported cars, the prices will decline 20 per cent,” a car importer said, adding that this move will bring pressure upon carmakers in the country, which are now enjoying high protection.

In addition the new tax mechanism is expected to raise locally sourced contents in cars assembled here. The current average local content is about 15 per cent but is limited with simple and lower value components such as batteries, seats and tires. Other parts such as engine, transmission, gearbox body and chassis are mainly imported.

However, according to experts, it takes at least one year for both policy makers and carmakers to get familiar with the new mechanisms including re-categorizing components.

“Only carmakers with current high local content on their products such as Toyota are able to cut their prices, and those with low local contents such as BMW and Mercedes-Benz, luxury car production firms, are likely to keep their prices unchanged,” they said.

VietNamNet