Mof's draft plan is going to apply more tax on imported cars. —  Photo xevaphongcach.net

HA NOI (Biz Hub) — Imported cars are expected to become more expensive by around 5 per cent if the finance ministry's draft plan to adjust the calculation of special consumption tax on imported automobiles is approved.

Under the current regulations, the special consumption tax on imported automobiles is calculated on their cost, insurance, and freight value plus current import tariff.

However, the draft plan suggests that the special consumption tax on imported cars with less than 24 seats will be calculated on the basis of the current special consumption tax plus the domestic sale fee of importers. The domestic sale fee should be calculated on the basis of fees paid for services such as packing, managing, advertising, displaying, transporting, and the warranty plus interest of tax payers.

The domestic sale fee will be levied on importers when cars are sold.

The new calculation method is expected to cause an estimated five per cent increase in the prices of imported cars.

According to the ministry, in comparison with locally-assembled vehicles, the current calculation of the special consumption tax on imported cars will create more competitive advantages for imported products in terms of prices.

It further said that the Vietnam Association of Automobile Manufacturers and many local businesses have complained that the current calculation of special consumption tax on imported cars has been unfair, particularly in the context of Viet Nam's international commitment to cut import tariff on automobiles from ASEAN countries to zero per cent by 2018.

Many local automobile importers fear that the ministry's proposal will create difficulties for them and will surely push car prices higher.

They noted that importers will have to go through more procedures to pay tax. They will have to pay the special consumption tax, which will be calculated after they complete all car import procedures, and then pay the domestic sale fee after their cars are sold.

They added that the new method will also force businesses to restructure their operations, from transporting, marketing and even warranty services, to ensure returns.

Meanwhile, the ministry has invited businesses, importers, and associations to give their opinion on the draft plan. The deadline to send their opinions to the ministry is May 20.

The draft plan will be submitted to the Prime Minister for approval in June; if approved, it will take effect from January 1, 2016.

From1998 till date, the special consumption tax on automobiles has been revised four times in keeping with the trend of regular reductions. Earlier in 2009, the tax was levied, based on the number of seats in cars. From 2009 till date, the tax has been calculated on the cylinder capacity of cars.

From 1999 to 2003, a sedan with five seats or lower was taxed 100 per cent of the car's value, while cars with six to 15 seats had to pay 60 per cent of their value.

From 2004 to 2005, tax on a sedan with five seats or lower was reduced to 80 per cent of their value, while cars with six to 15 seats had to pay 50 per cent.

From 2006 to March 31, 2009, a sedan with five seats or lower received a tax cut to 50 per cent, while cars with six to 15 seats were asked to pay 30 per cent of their value.

From April 1, 2009, till date, 45 per cent, 50 per cent and 60 per cent as taxes have been levied on cars that have nine seats and lower, with a cylinder capacity of below two litres, between two and three litres, and more than three litres, respectively. — VNS