The Government has hiked import taxes on used cars for the second time in three months following a circular released by the Prime Minister.— Photo toyota.edu.vn

HA NOI (Biz Hub)— The Government has hiked import taxes on used cars for the second time in three months following a circular released by the Prime Minister.

Cars of nine seats or fewer and an engine displacement of less than 1,000cc will see import tariffs rise by US$800 to $5,000 by June 26.

Meanwhile, used cars with a cylinder capacity of between 1,000-1,500cc will see taxes lifted to $10,000.

The previous hike in April saw the tariffs lifted significantly to $4,200 and $9,600 respectively.

According to the Ministry of Finance, the latest adjustment will narrow the gap between import tax on used cars and brand new cars, especially in the compact car division.

In March, Deputy Prime Minister Hoang Trung Hai asked the Ministry of Finance to review the import tax on used cars in a bid to restrain importers from disguising brand new vehicles as old ones in order to avoid higher tax rates.

It followed a proposal from local automaker Thaco Group, who reported that companies were fraudulently importing cars with small engines to fall into the lowest tax bracket.

According to recent regulations, in order to be defined as second-hand, used cars must have been registered in a foreign country for at least six months before being exported to Viet Nam and they must have a minimum mileage of 10,000km.

Thaco claimed that many importers disguised brand new cars as used ones by adjusting the mileage counters to over 10,000km and changing import documentation, allowing them to avoid the 70 per cent tax imposed on new cars.

Kia Morning cars assembled by Thaco in Viet Nam bear a $4,500 special consumption tax plus $2,500 of import tax for parts and accessories.

"That means fraud is resulting in unfair competition between imported cars and locally assembled cars, especially of the brand that we are assembling," said Thaco's CEO Tran Ba Duong.

Vie^.t Nam imported 4,000 cars worth $60 million in May, bringing the total car imports in the first five months of the year to 14,000 units, worth $247 million, according the General Office of Statistics.

The January-May imports represented a year-on-year increase of 13 per cent in import volume and 3.5 per cent in value, the office said.

Car importers and traders said the April 1 cut in registration fees had encouraged buyers, along with the loosened credits for automobiles.

According to the Ministry of Finance, Viet Nam imported 27,000 cars in 2012, down 50 per cent year-on-year. — VNS