VietNamNet Bridge – The Ministry of Finance (MOF) has finally decided to raise the tax rate on brand new and used imports by 10% after it three times lowered the tax. It seems that the ministry does not know for sure what it needs to do to encourage the local automobile industry.

Explaining its decision to raise the tax rate, MOF said that this aims to reduce the trade deficit, and control imports as too many cars may create more serious traffic jams.

Just one day after MOF announced the decision to raise the tax, car importers announced they would raise sale prices by 10% to cover the higher tax.

Hoang Thi Vinh, Director of Hai Phong-based Vinh Hoang Company, said that she lowered the sale price by $2-3,000/unit when taxes decreased, and now she has to raise the sale price.

Ha Minh Tuan, Director of Hyundai Motor Vietnam (HMV), also said that HMV’s products will be 4-6% more expensive. For example, Santa Fe, 2.7L, the best seller of HMV, will have the sale price of $39,200/unit, up by $2,200/unit.

Tuan said that car importers are now facing a lot of difficulties as banks are limiting loans for car import deals. Previously, he could borrow $5-10mil each time, while he now can get $1-2mil only.

He also said that car importers are facing high VND/US$ exchange rate risks. They import cars when the dollar value is high and get deliveries 2-3 months after placing orders, and sell cars when the dollar value is lower.

Meanwhile, local automobile joint ventures also are not applauding the decision by MOF to raise the tax, though it will make imports more expensive and locally made products more competitive.

“We cannot set our long-term production and business plans if the government changes the tax policy all the time,” a representative of an automobile joint venture said. He added that customers will suffer if the government does not have suitable policies.

Nguyen Duy Quang, a civil engineer, said that he is planning to buy a used car, but he may have to wait as the tax rate has been raised, and the registration fee will also increase.

“Why don’t policy makers think of improving the transport capacity, instead of only focusing on limiting consumption?” he questioned.

Meanwhile, experts said that MOF’s reasons to explain the decision on tax increase prove to be unconvincing. Traffic jams only occur in Hanoi and HCM City due to bad urban management. The problems of the two cities must not be the reason for which MOF releases a decision which has impact nationwide.

Customers criticised MOF for protecting local automobile manufacturers by raising the tax to limit imports.

Regarding the trade deficit control, an official from the Ministry of Trade and Industry said that Vietnam needs to limit the imports of products that can be made domestically. Meanwhile, cars cannot be made domestically, and the demand for cars is increasingly high.

(Source: Lao dong)