Ministries at odds over special consumption tax on autos
Ministries at odds over special consumption tax on autos
While the Ministry of Finance wants the highest special consumption tax rate imposed on autos, at 75% of a car’s value, the Ministry of Industry and Trade is pushing for a maximum of 150%.
The Government Office is collecting comments from Government members on the special consumption tax rate proposals before a final decision is made.
According to the tax hike plan proposed by the Finance Ministry, all auto models with engine capacities of over three liters would be subject to a special consumption tax rate of 75% from July 1 next year, up 15 percentage points against the current rate, and 70% from January 1, 2018, down five percentage points against the rate imposed next July and up ten percentage points against the existing level.
The industry ministry wants autos with engine capacities of over three liters to be divided into groups and be subject to the highest tax ever.
In particular, with the autos having engine capacities of three to four liters, four to five liters and five to six liters, the respective rates of 90%, 110% and 130% have been sought, up 30, 50 and 70 percentage points.
Besides, the proposed rate for autos with engine capacities of over six liters would rise to 150%, 90 percentage points higher than the existing rate. The Ministry of Industry and Trade expects its proposed tax hike to take effect next July.
With autos of under 1.5 liters and currently paying a special consumption tax of 45%, the Government Office suggests two plans for selection. Under the first plan, vehicles with engine capacities of under one liter would enjoy a lower tax, at 25% with effect from July 1 next year, and at 20% with effect from January 1, 2018, while the respective taxes for vehicles of 1-1.5 liter are proposed at 30% and 25% respectively.
In the second plan all cars with engine capacities of under 1.5 liters would be subject to a 30% tax.
The highest tax recorded so far was 100% on under-five-seat cars. Such a high rate was applied in the 1999-2003 period as stipulated by the law on special consumption tax which was introduced in 1998.
The tax hike proposed by the Ministry of Industry and Trade aims to protect its stance of imposing high special consumption tax on luxury cars and low rates on compact cars when drafting a decision of the Prime Minister on the auto industry development policy.
The finance ministry did not agree with the industry ministry on this issue, saying that the amended special consumption tax law was passed late last year and the Government also agreed that special consumption tax would not be adjusted until 2018.
The news site Vietnamnet quoted experts as saying that the imposition of special consumption tax is not affected by Vietnam’s international integration commitments, but others warned Vietnam might violate the non-discrimination rule of the global trade club WTO.
An expert said if Vietnam’s application of high special consumption tax on passenger cars with engine capacities of more than three liters as proposed by the industry ministry means the country uses the tax measure to restrict the consumption of imported cars.
If the industry ministry’s tax increase proposal is approved, car prices would soar, according to carmakers. The current number of luxury car users in Vietnam is small, so higher tax rates will hit sales in this segment, thus affecting import tax revenues.
Vietnam currently imposes three special consumption tax rates on under-nine-seat cars, with 45% on cars with engine capacities of under two liters, 50% on cars of two to three liters and 60% on cars of over three liters.
