Car Tax Increase: Luxury Cars Hard to Live

Increasing Automobile Taxes: Luxury Cars Living 1 Thanh Phong Auto HCM

According to a recent research proposal of the Ministry of Industry and Trade on the method of calculating special consumption tax for passenger cars, it is expected that the tax rate will rise to a record high, the price of cars will be higher than 2-3 times higher than current prices. However, there are still a lot of mixed views from car manufacturers, importers, experts, even consumers.

Increasing Automobile Taxes: Luxury Cars Living 2 Thanh Phong Auto HCM

Popular cars benefit

According to the proposal of the Ministry of Industry and Trade, vehicles with engine capacity of above 2 liters and above will increase the special consumption tax rate higher than the current tax rate. Especially, the highest tax rate is for cars with a capacity of more than 6 liters, special consumption tax will be 195%, an increase of 135% compared to the current tax rate.

Vehicles with small capacity are subject to a low tax rate, such as vehicles with a capacity of less than 1,5 liters will only apply an 30% tax, a reduction of 15% compared to the current level. Vehicles with a capacity of from 1,5-2 liters, the tax rate may be maintained at 45%.

According to the Ministry of Industry and Trade, the more fuel-efficient and environmentally-friendly vehicles are, the more expensive they are to impose high taxes to limit consumption, increase budget revenues, and reduce trade deficits.

Increasing Automobile Taxes: Luxury Cars Living 3 Thanh Phong Auto HCM

If the excise tax rises, carmakers have to improve their engines in small capacity but strong capacity to compete. In the photo: Customers looking to buy a car at the Vietnam Motor Show 2014 exhibition held in Ho Chi Minh City. Photo: Q.HUY

The representative of Truong Hai Auto Joint Stock Company (Thaco Group) - a domestic manufacturer and assembly of vehicles agreed with the tax calculation method offered by the Ministry of Industry and Trade. For vehicles with low fuel consumption and environmental friendliness, tax reduction is required. Moreover, most Vietnamese people use cars with engines under 2 liters, the prices are suitable for the income, and mainly run in the city so they do not need big engines. Large, fuel-consuming cars need a high tax.

But many carmakers say they will face many disadvantages if the regulations to adjust the special consumption tax implementation.

Mr. Vu Truong Giang, Head of Development and Sales of Infinity Car Company in Vietnam, said that its cars had engines from 3,5 to 4,6 liters, the lowest retail price was 2,7 billion.

Audi is also in the category of subject to high tax adjustments. If this provision is implemented, the car will have a very high price, 2-2,5 times compared to the current price. Excessive prices will significantly affect the number of customers.

According to Tran Tan Trung, General Director of Lien A International Joint Stock Company, a genuine distributor of Audi Vietnam, the models with large capacity of 2,5-3 liters, which consume more fuel, increase the tax. As for cars with an engine capacity of 2-2,5 liters, the tax rate should be kept unchanged because at present this segment of the market needs a lot and moderate prices. While motor vehicles under 2 liters mostly run in the city. If an increase of 20% is added, the special consumption tax for this vehicle is 70%, very high. At that time, the consumers themselves would suffer.

Priority should be localized

Although many people think that the tax rate is not reasonable, many car manufacturers' representatives said that the increase of special consumption tax based on the engine capacity of the car is the right way for Vietnam.

Mr. Tran Tan Trung, General Director of Lien A International Joint Stock Company, said countries around the world are also imposing high taxes on vehicles with large engine capacity, high fuel consumption, affecting the environment. school. It is this regulation that will force car manufacturers to change the engine capacity, and use new technology to increase engine power output according to consumer demand.

A representative of choxe.net forum, an expert in the automotive business, said that if this tax rate is applied, it is certain that cars with large engine capacity of 3 liters or more will die. It is possible to spend 2 to 3,5 times to buy a car of such high value. High value car companies will leave Vietnam. As for cars with smaller engine capacity, which are selling in large quantities, they will thrive, especially enterprises (enterprises) producing and assembling popular and cheap cars.

However, according to this position, if calculating excise taxes also need to consider the localization rate. Enterprises manufacturing and assembling cars in the country have a high localization rate, they should consider reducing taxes or enjoying preferential tax rates corresponding to the localization rate of that enterprise. As for enterprises that merely assemble, they set up factories in Vietnam to enjoy preferential policies, cheap workers but do not benefit the domestic automobile industry, they need to raise taxes. If they can prove the localization rate, the tax rate is lower. Particularly for importing enterprises, it is necessary to increase high taxes.

Representatives of an imported car manufacturer said that they do not have to worry because they can change small engine capacity to enjoy lower taxes but the engine capacity is still strong to meet the needs of users. Imported automakers all have new Turbo engine technology that helps increase engine power while keeping the engine compact. These firms only need to change the smaller engines under the 2 liter but add the Tubor engine, the engine capacity will be as strong as the large-capacity vehicles such as 2,5 liters, 3 liters and medium fuel economy.

Many automotive experts believe that domestic automobile assemblers such as Toyota, Honda, Isuzu, Mercedes ... will face disadvantages if the special consumption tax increases. The reason is that these automakers have more cars from 2 liters or more in the high tax increase, but in Vietnam they are using old technology, no Turbo engine, so they will lose the competition.

Increasing tax on large-capacity motor vehicles is reasonable, then those who want to buy powerful motor vehicles, fuel-efficient vehicles are subject to high taxes. Engines with a capacity of less than 2 liters, cheap, medium to protect the environment, suitable to the reality of Vietnam's economy, need to reduce tax. In addition, the segment of motor vehicles under the capacity of 2 liters is the Vietnamese cars that are producing components and cooperating to assemble. This will increase the competitiveness of the domestic automobile industry. Major car manufacturers in the world are forced to change modern technology towards saving fuel to serve the Vietnamese market.

Assoc PHAM XUAN MAI, Former Head of Traffic Engineering Department - Ho Chi Minh City University of Technology

QUANG HUY

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