VietNamNet Bridge – Though affirming the downward trend of the import tariff on brand new car imports under the mode of complete built units (CBU), the Ministry of Finance says it would take very cautious steps in this process to avoid negative impacts on the domestic automobile manufacturing.

In the report to the government last week, the Ministry of Finance (MOF), when mentioning its viewpoint on the automobile taxation policy, said that it would take cautious steps in the issue.

On one hand, it would maintain the policies to create a pressure on domestic manufacturers thus forcing them to ease the sale prices to benefit consumers. On the other hand, the policies should be designed in the way to encourage local production.

MOF has promulgated the circulars declaring the preferential tariffs with the tax rates to be applied in 2012-2014 with reference to the bilateral and multilateral trade pacts, of which Vietnam is a member.

However, from 2015, MOF would have to consult with agencies and relevant associations and submit the taxation plans to the Prime Minister before making public the new tax policies.

Regarding the roadmap on tax decreases under the WTO commitments, MOF said it has been cutting the tariffs as committed every year, while any tax adjustments have been made public.

As for the kinds of vehicles of which Vietnam does not encourage consumption, mostly the models with less than nine seats, the viewpoint of MOF is that the tariff cuts would not be sharper than the tariff cut process Vietnam has promised.

This means that the tariff would be 74 percent in 2013, which would be lowered to 47 percent and then to 52 percent in 2019. Meanwhile, prior to that, people hoped that MOF, in order to protect consumers’ benefits, urge automobile manufacturers to accelerate the technology transfer and increase the locally made content ratios, might cut the import tariffs more sharply and sooner than initially expected.

As for used CBU imports, the import tariffs would still be at the highest possible levels, in accordance with WTO commitments.

Regarding the import car part imports, the average import tariff for the sets of car parts for assembling the models with less than nine seats is now at 18-20 percent.

The average tax rate is far below the CBU import tariff at 74 percent. However, MOF has affirmed that the gap has been narrowed if compared with the gap of five years ago.

At that time, the sets of car parts were taxed 15 percent, while the CBU import tariff was 100 percent, which then encouraged to import sets of car parts to assemble domestically.

MOF has also affirmed that when the CBU import tariff reduces to 47 percent and 52 percent as committed, the import tariff of car parts would still be maintained at 18-20 percent as currently.

This is because, according to MOF, enterprises mostly import car parts under the mode of CKD (complete knock down), which means that sets of car parts with low separation levels, thus leading to the low localization ratio of car products.

If MOF slashes the car part imports further, automobile manufacturers would rather import CKD sets of car parts rather than trying to make car parts in Vietnam. If so, Vietnam would fail to implement its plan to encourage manufacturers to increase the locally made content ratio and develop supporting industries.

TBKTVN