Vietnam's Taxes on Import Cars to Be Cut

The import duty on cars will be cut by 3-5 per cent from next year if a proposal drafted by the Ministry of Finance is approved.

Under the draft, cars with less than 10 seats will be taxed at a new rate of 68-78 per cent as of January 1 instead of the current rate of 72-83 per cent.

Tax on small trucks with loads of less than five tonnes will also be cut from 68 per cent to 65 per cent. The taxes imposed on large trucks will remain unchanged under the draft.

The new tax rates will be applied to all cars imported from member countries of the World Trade Organisation and the regional Southeast Asian bloc ASEAN.

However, car traders said that the tax cut would not help reduce prices of imported cars and would not affect the domestic market.

Nguyen Tuan, director of the Thien An Phuc auto company, explained that supply of imported cars in the domestic market was currently restricted in the wake of the application of Circular 20. Since the circular took effect three months ago, most car traders have been unable to import cars.

Echoing Tuan, Vu Chung Nam, director of the Tin Phat auto company, said despite the tax cut, car prices would only increase because supply was restricted, adding that consumers would not benefit from the move.

Circular 20 stipulates that importers of cars with less than nine seats have to show proof that they are authorised dealers for the foreign car manufacturers. The documents have to be notarised by Vietnamese diplomatic representatives in the country of origin.

Many dealers said it was practically impossible to obtain the necessary documents. Foreign auto companies who had joint ventures in Viet Nam would not give any such authorisation to importers, they said.