Doubling of imported used car tax proposed
Importing used cars with nine seats and less will become harder if a proposal to raise used car tariffs is approved by the Government. In fact, the proposed import tax rate is double its current level and would make used cars more expensive than new ones.
|An imported used car showroom on Nguyễn Văn Cừ Street, Hà Nội. - VNS Photo Trương Vị|
The draft was recently issued by the Ministry of Finance to gather ideas from other sectors.
Deputy Head of the Tax Policy Department, Nguyễn Thị Thanh Hằng, said it was meant to minimise the import of used cars and contribute to developing the domestic automobile industry.
He also said the tax rate on most imported used cars with nine seats and less was currently lower than that to which Việt Nam is committed with the World Trade Organisation (WTO). Therefore, the ministry has proposed an increase to the highest level acceptable.
The draft shows that for vehicles of 2,500cc or more, SUVs, sport cars and passenger cars (excluding vans), they will have a mixed tax rate calculation.The taxable price of used cars multiplies by 200 per cent or 150 per cent plus $10,000. As for other vehicles, the taxable price multiplies by the import tax rate on the new automobile of the same type, plus $15,000.
For vehicles of 10-15 seats with an engine displacement or less than 2,500cc, the taxable price is multiplied by the import tax rate on the new automobile of the same type, plus $10,000. Tax on cars above 2,500cc is multiplied by the new automobile tax rate of the same type, plus $15,000.
Tiền Phong (Vanguard) newspaper quoted an auto shop owner saying the finance ministry proposal would encourage consumers to buy new cars, especially given that prices of locally assembled and imported cars were strongly discounted.
The new draft will also help stop the import of old cars, out-of-date cars from foreign countries, which would turn Việt Nam into a car dumping ground.
Nguyễn Văn Thanh, the director of Customs at Đình Vũ Port in the northern Hải Phòng City, said the office had recently required a buyer to re-export a luxury car, which was claimed old but was new.
Thanh said the four-seater car Bentley Bentayga, which was imported from the US, was produced in 2016 with an engine displacement of 5,950cc. The car, worth VNĐ4.93 billion, was claimed to have run more than 10,000km and been in use for six months. However, the kilometres’ log did not match the car’s technical condition.
According to statistic from the finance ministry, the number of used cars with nine seats and less has dropped in recent years due to continuously increasing import tax. In 2013, Việt Nam imported 3,777 units, but the figure was down to 1,441 in 2016. The volume of used trucks has rapidly increased because those imported from China are cheap.
Director of Thiên Phúc An Company Nguyễn Tuấn told the Tiền Phong newspaper that the used cars imported to Việt Nam were mainly luxury cars with high engine displacement from 3,000cc up. However, as of July 1, 2016, when the special consumption tax was raised on high engine displacement cars, most businesses stopped importing this type of vehicle.
“With the finance ministry proposal, the price of used cars will certainly rise and the gate for the used car business will become even narrower,” said Tuan.
He calculated that on a used Camry imported from the US with an engine displacement of 2,500cc and taxable price at $20,000 the importer would have to pay $19,000 in tax following the current import tariff. Under the draft proposal, the vehicle’s import tax will rise to $31,000 per unit, plus the special consumption tax worth 50 per cent of the car value, value-added tax of 10 per cent and profit of auto dealers.
If the price of a used car will be VNĐ100-200 million higher than of a similar but new type, no one will buy it, said Tuấn.