Ministries at odds over tax reduction for trucks

Date Posted: 2012-01-27


(Vietnam Today Online) HCMC - The tentative scheme to lower import tariffs on trucks has made a rift between the Ministry of Industry and Trade and the Ministry of Finance, with the former saying the time has not come while the latter upholding the view.

The Ministry of Finance has earlier disseminated a draft for feedback, suggesting sharp tax reduction for trucks of different categories. The draft was sent to the Vietnam Association of Automobile Manufactures and the ministries of Industry and Trade, Planning and Investment, and Transport.

According to the plan, tariffs would be cut from 80% to 30% for 5-tons trucks, from 55% to 25% for 5- to 10-ton trucks, from 30% to 25% for 10- to 20-ton trucks and from 15% to 8% for 20- to 45-ton trucks.

The Finance Ministry reasoned that a truck is a corporate vehicle for transport, and the current tax applied for a 10-ton van is too high. Meanwhile, this kind of vehicle is mostly assembled domestically, not manufactured, with main parts being imported.

Even with the tax adjustment, the difference is still 10 to 15 percentage points compared with tariffs on components and accessories, so the lower tax rates should not adversely affect local manufacturing, according to the ministry.

But the Ministry of Industry and Trade bluntly rejected the plan.

In a newly-issued document, the Ministry of Industry and Trade said such a tax-reduction scheme was earlier than commitments Vietnam made with the World Trade Organization.

According to this ministry, the import tax on an under-five-ton van in 2011 should be 70% while it should be 50% for a 5- to 10-ton truck and 30% for a 10- to 20-ton truck. Any further adjustments later will be considered depending on local manufacturing and market conditions, the ministry said.

The Ministry of Industry and Trade suggested the Finance Ministry cut the tariffs from 80% to 70% for 5-ton trucks, from 55% to 50% for 5- to 10-ton trucks, and continue the current rate of 30% for 10- to 20-ton trucks. These rates should be applied from the end of 2011 and reviewed and adjusted from 2012 based on the development of the domestic market as well as the capacity of local companies.

In the same chorus, local auto manufacturers and experts said the plan to reduce import taxes on trucks proposed by the Ministry of Finance could harm the domestic automobile industry.

Tran Ba Duong, general director of Truong Hai Auto Joint Stock Corporation, said the proposed tax cut would be too hasty and far earlier than the deadline of 2018, as provided for in the nation�s commitments to the World Trade Organization. Duong added that enterprises would not be able to make timely plans to deal with the impacts of a tax reduction scheme of such an extent.

Besides three factories for assembling trucks, buses and passenger cars and five factories for manufacturing auto components, Truong Hai is inviting foreign and local investors to invest into Vietnam�s auto industry.

Meanwhile, Bui Ngoc Huyen, general director of the Xuan Kien Automobile Joint Stock Company, or Vinaxuki, told local media that the proposed low tariffs, to be implemented without giving time for preparations, would not help develop the domestic auto industry, and might lead to the shutdown of factories.

His company began assembling autos in 2004 and had since poured VND1 trillion into production, said Huyen. The company expects its autos to be made with 50% locally produced parts by 2012.

�The company�s localization rate for assembled trucks will also rise from 15% to 50%,� he said. �But the proposal to cut import tax for trucks would have a negative impact on our investment in production of truck components as well as adversely affect the auto industry�s development strategy.�