VietNamNet Bridge - Citing local production protection, the Ministry of Finance (MOF) wants to ease the import tariffs on automobile parts. However, the move could 'fatten’ foreign invested enterprises (FIEs) only, while local manufacturers will not see benefits.

Dr. Nguyen Van Nam, a renowned economist, who believes that Vietnam’s tax policies give big preferences to FIEs, has warned that the tax cuts may bring undesired effects.

“With the plan, MOF will identify FIEs and Vietnamese owned enterprises,” Nam said.

“FIEs, which mostly invests in assembling factories in Vietnam, will get big benefits when the car part tariff is cut. Meanwhile, Vietnamese enterprises, which meet a lot of difficulties, including the lack of capital, land, technology and distribution network, cannot get any support,” Nam commented. 

Commenting that slashing import tariffs is the only tool state management agencies have to regulate the automobile industry, Nam said that the preferences designed by MOF will only bring big benefits to foreign automobile manufacturers.

An analyst, agreeing with Nam, mentioned the story about Vinaxuki, a 100 percent Vietnamese automobile manufacturer.

The owner of Vinaxuki, well known for his ‘Vietnam-made-car dream’, has to sell his workshop, equipment and scrap materials to pay debts.

“He did not receive the necessary support from the State, though he had strong determination to develop Vietnam’s automobile industry,” the analyst commented.

He went on to say that the MOF’s attempt to slash tax won’t benefit Vietnamese automobile manufacturers, and won’t benefit Vietnamese consumers as well.

While MOF cuts the import tariff on car parts, it raises the luxury tax on CBU imports (complete built units). This allows the state to offset the decreases in the tax sums to be collected from car part importers. However, Vietnamese consumers will suffer because the car prices will be increasing.

Nam, when commenting about the prospect of the Vietnam’s automobile industry, said ‘MOF’s plan cannot show the light at the end of the tunnel’.

“Only FIEs will get benefits from the new policy, if it is approved. And the state’s revenue will be stable, because it cuts the tariffs on some things, but raises tax on others,” he said.

“The suggested policy won’t help rescue Vietnamese manufacturers who are facing too many big problems,” he commented, adding that no tax policy laid down so far can solve the root of the problem.

Vietnam vows to develop its automobile industry and therefore, it needs to protect domestic production. However, Nam said, it is necessary to find out who should be the cadre of the automobile industry so as to design reasonable policies.

“Policies should address the most important subjects, and they must not target everything in general,” he said.

Dat Viet