With imported car tax down from 90 per cent to 80 per cent, the Ministry of Finance hopes that the price in Vietnam will be reduced by at least 5 per cent. However, experts consider it unlikely that Vietnamese consumers will be able to buy cars with lower prices as it depends much on importers, customs and domestic auto-assembly businesses.
According to a car importer, there are still divergences between importers and customs on price evaluation. While customs base their price on the quotation on the Internet, the cars are, in fact, bought by businesses for much lower prices. A car imported with a voucher of US$10,000 is even rejected by customs. They insist that the price is US$14,000 and the importer must pay tax accordingly. Therefore, importers believe that even with import tax reduction, the prices could not be lower in Vietnam. Currently, the import is only in small numbers and by individual orders. Certain importers have turned to other businesses.
Vice Minister of Finance Truong Chi Trung said that as Vietnam is a WTO member, the policy must be transparent. Since 2004, Vietnam has applied the GATT taxation system, allowing businesses to make their own import declaration while customs base on it to levy taxes. In case of doubt, customs may resort to price evaluation. For importers, they may sue customs for any wrong doing.
As a matter of fact, price evaluation is only one among many causes of the price hike.
The price also depends on the protection policy of the domestic industry, infrastructure fees and even the importers.
The import tax reduction from 90 per cent to 80 per cent does not effectively improve the local joint ventures of auto-assembly. Even if the price is 5 per cent less as predicted by the Ministry of Finance, it is still inadequate for the local industry to change their business planning. In reality, with promotional programmes, local consumers have received gifts equivalent to 5 per cent of the car price. As a result, a dramatic price reduction is unlikely.
Vice Minister of Industry Do Huu Hao said that in theory, domestic price will be affected by the import tax reduction, however the reduction of 10 per cent is too small to make a change. The import price depends on taxation policy, while domestic price can only be reduced by competition pressure. According to WTO commitments, the auto import tax will be reduced by schedule and only in 2020-2025 can Vietnamese consumers buy cars at equivalent prices to the region. The present tax rate remains at least twice as high, Mr Hao added.
Mr Vo Tri Thanh, National Economic Research Institute, said that as local joint ventures of auto-assembly continue to enjoy import tax reduction of 52 per cent for at least 2-5 years, they are quite “happy” with the current price policy. In principle, with WTO membership, Vietnam has to abolish protection policy and discrimination between local and foreign businesses. However, the commitments are applied only to special consumption taxes at an early stage, while the import tax reduction will be applied gradually in many years. In effect, Vietnamese consumers have to buy cars at high prices in the coming years, Mr Thanh concluded.
Likewise, another expert from the Institute believes that even with tax reduction, the importers will not share the profit with the consumers and continue to charge the same prices. Finally, there will be no change in the domestic auto market.
Nonetheless, Vice Minister Truong Chi Trung still believes that the 10 per cent reduction in car import tax will lead to a 5 per cent reduction in car price. Though the tax policy does not directly affect the price of local production, big volumes of import and competition will certainly lead to price reduction. (VNA)
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