The Ministry of Finance plans to cut import taxes on auto parts, in line with the World Trade Organisation’s rules (Photo: bnews.vn)Hanoi (VNA) - The Ministry of Financeplans to cut import taxes on auto parts, in line with the World TradeOrganisation (WTO)’s rules.
Its WTO commitments require Vietnam to maintaina tax level on import auto components between zero percent and 30 percent.Officials say the tax changes will also serve domestic interests.
Speaking at a press conference at Smart IndustryWorld 2017 in Hanoi last week, Deputy Minister of Industry and Trade Do Thang Haisaid the import tax cuts would bolster auto production in Vietnam by levelingthe playing field between imported vehicles and vehicles made in the countrywith imported parts.
“Automakers said that theyhad not received much support from the State, but the Government’s coming documentwill create fair play for businesses,” Hai said. “Automakers and autoassemblers only need to be treated as fairly as auto importers.”
The automakers have invested thousand, evendozen thousand billions of VND, but there is still an unreasonable thing thatthe import tax on auto parts is higher than that of complete built-up units,said Hai.
In a draft document currently being sent torelevant ministries, sectors and associations to collect ideas, the financeministry presents two methods for implementing the tax cuts, which will applyto parts that are used to assemble cars with nine seats or fewer and truckswith capacity of five tonnes and below in Vietnam. The document will besubmitted to the Prime Minister for approval in the future and would be ineffect from January 1, 2018 to December 31, 2022.
In the ministry’s first proposed method, theimport tariffs on 163 auto parts will be down to zero percent. Accordingly, theaverage tariff of the set of auto components will be reduced from 14-16 percentto 7 percent for the nine-seat cars and to 1 percent for trucks.
In the second method, the ministry wants todecrease import tariffs on 19 parts including engine, gear-box, automatictransmission system and fuel injection pump, which are not produced in Vietnam,from 3-50 percent currently to 0 percent. Under this plan, the average importtax on the set of auto components would decrease from 14-16 percent to 9-11 percentfor cars and to 7.9 percent for trucks.
According to the finance ministry, both methodsencourage businesses to manufacture and assemble autos locally. Officials saythe cuts would increase competitiveness with imported cars, support the localindustry, increase domestic consumption and promote exports.
Comparing the two methods, the ministry said thefirst method would help automakers cut costs more significantly than the secondmethod.
[Ministry mulls auto industry protection]
The first method would decrease total importtaxes on components for both kinds of vehicles by an estimated 5.23 trillionVND (229.79 million USD). It would result in 535 billion VND more in corporateincome as production increased. As for the second method, the total import taxwould be reduced by 3.5 trillion VND and corporate income would increase by 535billion VND.
To benefit from the tax cuts, the ministry saidthe automakers would have to reach an annual growth rate of 16-18 percent and40 percent of production value must be accrue locally, in line with thenational automobile industry development programme. Automakers that don’thit the targets will pay higher taxes on imported parts.
Manufacturers of cars must reach an annualgrowth rate of 16 percent, with a minimum output of 34,000 units by 2018.Output must rise steadily each year to hit 61,000 units by 2022.
With this requirement, the ministry said threemay be already qualified to join in the programme. According to the Tien Phong(Vanguard) Newspaper, they are Toyota Motor Vietnam, Hyundai Thanh Cong and theTruong Hai Automobile Corporation.
As for trucks, the ministry requires themanufacturers to achieve an annual growth rate of 18 percent, with a minimumoutput of 8,000 units in 2018, raised to 15,000 by 2020.
There may be one business qualified under theseregulations, said the ministry.
Autos must also meet emissions and fuelconsumption standards. The cars are required to have engine displacement of2,000cc and below, meaning they must be relatively fuel efficient. The carsmust also consume less than seven litres to travel 100km, and cars and trucksmust meet strict European exhaust emission standards.-VNA
VNA
