VietNamNet Bridge - The Ministry of Finance (MOF) has decided to change the method of calculating a luxury tax on car imports, striving to support the development of the domestic automobile industry and increase state budget revenue from tax collection.

 

From January 1, 2016, the taxable car price would be the selling price quoted by genuine importers, not the CIF price plus import tariff.

If the new taxation mechanism suggested by MOF is approved by the government, analysts say the domestic car market and the Vietnamese automobile industry will see big changes and have new faces. 

Vietnam has been warned that automobile manufacturers will stop their production in the country and instead import cars from ASEAN nations for domestic sale, as the import tariff cut from 2018 would make imports cheaper than locally made products.

If this occurred, Vietnam would fail to implement its plan to develop an automobile industry of its own. 

However, if the recommended luxury taxation mechanism is applied, the retail prices of CBU (complete built unit) car imports from South East Asia will not decrease as predicted. 

The car prices would even increase, starting from 2016, or two years earlier than the day ATIGA (ASEAN Trade In Goods Agreement) takes effect.

Meanwhile, the selling prices of non-South East Asian cars will increased even more sharply as imports from countries do not enjoy tariff cuts.

As such, the MOF suggested that the taxation mechanism is believed to serve as a measure to support CKD (complete knocked down) cars and domestic production.

Second tree

Analysts said that MOF wants to adjust the way of calculating the luxury tax on CBU cars, not on CKD cars.

Taxable prices of CKD cars are now the factory price, while the taxable prices of CBU cars are the prices at border gates. This puts CKD products at a disadvantage.

However, instead of changing the tax calculation method on CKD cars as auto manufacturers have proposed, MOF decided to change the tax calculation method on CBU cars.

Analysts said this would not only ensure fairness for both CKD and CBU cars, but also ensure stable revenue for the state budget, despite tariff cuts on ASEAN car imports from 2018.

However, they also pointed out that the new mechanism would bring disadvantages to all domestic manufacturers, car importers and consumers. 

Importers would have to pay a higher luxury tax, while domestic manufacturers would not enjoy tax incentives to expand the market. Consumers would have to pay higher prices for cars.

TBKTVN