Ministry proposes to cut consumption tax on cars

Monday, Dec 15, 2014 17:09

A Toyota Innova 2.0V. Its price is calculated to reduce by more than VND110 million if the tax and fee were to be cut. — Photo

Ministry proposes to cut consumption tax on cars

By The Dat

HA NOI (Biz Hub) — Car prices in Viet Nam are likely to reduce by hundreds of millions of dong next year, if the industry and trade ministry's draft plan is approved.

In the draft plan, the ministry has proposed to cut 50 per cent of the special consumption tax and the registration fee on new cars. In particular, the cuts will be up to 70 per cent for cars that have 40 per cent locally produced parts.

The higher the percentage of locally produced parts in cars, the more these cars will get in terms of cuts in the consumption tax and registration fee.

According to experts, automobile manufacturers that will receive such preferential tax rates in Viet Nam are likely to be Toyota Vietnam, Truong Hai Auto Group, besides Vinaxuki. They all have models with 40 per cent locally produced parts.

If the preferential tax plan is approved, the special consumption tax on cars with 10 seats and less will be between 22.5 and 30 per cent, and the registration fee will be from five to seven per cent.

When both the tax and the fee are reduced, the prices of cars in the Vietnamese market will fall heavily next year. The consumers will get more opportunities to own cars.

The experts also calculated that while a Toyota Innova 2.0V is worth VND814 million, a buyer has to pay an additional special consumption tax of more than VND40 million (equal to the current tax of five per cent of the car's value), and more than VND122 million in registration fee (or 15 per cent of the car's value). These raise the Innova's cost to more than VND970 million.

In this case, if the tax and fee were to be cut, the consumers will get to save more than VND110 million when they buy an Innova. This will help make domestic car makers competitive and create opportunities for people to buy cheaper cars.

If the prices of locally assembled cars are cut, and the tax rates are reduced, the country's plan to join the ASEAN Free Trade Area (AFTA) will also help reduce the prices of imported cars.

As per the schedule, from 2014 to 2018, the import tax on completely built units (CBU) from ASEAN nations will be reduced to zero per cent. The tax will be reduced to 50 per cent in 2014, 35 per cent in 2015 and 20 per cent in 2016. Then it will be cut to 10 per cent in 2017 and zero per cent in 2018.

The reduction of taxes on imported cars may be the best news for many Vietnamese customers because they want to own cars that match their income and living standards. — VNS

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