VietNamNet Bridge - Vietnam will have to cut the tariff on CBU imports from ASEAN from 30 percent to zero percent in 1.5 months, but state management agencies and manufacturers are still arguing about the import tariff on car parts.

The Ministry of Finance (MOF) has submitted to the government a plan to help domestic automobile manufacturers cut production costs by applying a zero percent import tariff on car parts which cannot be made in Vietnam. 

The preferential tariff will be applied to manufacturers which can satisfy requirements on localization ratios and output.

MOF has submitted to the government a plan to help domestic automobile manufacturers cut production costs by applying a zero percent import tariff on car parts which cannot be made in Vietnam.

The Vietnam Automobile Manufacturers’ Association (VAMA) disagrees with the plan. Its chair Toru Kinoshita said Vietnam needs to apply the zero percent tariff to all automobile and car part manufacturers, with no requirement on localization ratio and output.

He said if Vietnam doesn’t cut the tariff on car parts to zero percent, it would encourage imports, rather than domestic production.

TMT Automobile, in a document to government agencies, also said that some kinds of car parts bear tariffs of 3-25 percent. Domestically made cars will have high production costs, thus making them uncompetitive with the CBU imports.

In reply, MOF said if Vietnam doesn’t set requirements on the localization ratio and output, it won’t be able to develop the automobile industry. 

“Enterprises propose to cut the import tariffs on car parts, but they want to develop supporting industries. This is a paradox,” said Nguyen Thanh Hang from MOF.

“Despite a lot of incentives offered to automobile manufacturers since 2004, the locally made content ratio is still low. Do enterprises really want to raise the ratio? Do they want to develop supporting industries?” she said.

Nguyen Minh Dong, who was a designer for Volkswagen, advocates exemption of the import tax on car parts and says the policy needs to be implemented immediately.

However, Dong thinks only the car parts which cannot be made domestically should enjoy the preferential tariff. MOF should raise the tax rates on the import products which can be made in Vietnam.

“This would encourage automobile manufacturers to increase their investments to make car parts in Vietnam,” he said.

A representative of an automobile corporation said from 2018, there will be a battle between domestically made products and imports, but also a battle among ASEAN countries. 

He said other regional countries are giving big support to their automobile manufacturers to help them fully exploit the zero percent tariff. Thus, it is not the right time to debate.

“It is necessary to reduce the corporate income tax, and exempt VAT for companies which manufacture small-size products in large quantities,” he said. “It is also necessary to encourage manufacturers to export their products to regional countries.”

RELATED NEWS

Small, affordable cars to be sold in Vietnam after 2018

Domestically made cars to be cheaper thanks to tax incentive

Tran Thuy