Foreign carmakers oppose higher Vietnam tax
HANOI - Foreign
carmakers said on Wednesday a
proposed hike in consumption tax by
Vietnam could raise the price of a
standard car by as much as 50 percent
next year and cripple the young industry.
"It would be so catastrophic for both
producers and consumers if they go
ahead with the new taxes," said an
official of Vietnam Automobile
Manufacturers Association (VAMA).
The association groups 11 foreign
companies, including Toyota Motor
Corp , Vidamco, a local
venture with General Motor Corp Daewoo, and Ford
Motor Co .
Auto sales could drop by as much as
90 percent by 2005 if the government
ratifies the tax, VAMA said. The group
expected to sell 33,000 units this year,
up 22 percent from 2002 if the tax was
unchanged.
The proposal seeks to gradually
increase special consumption tax rates
for locally assembled automobiles to a
ceiling of 70 percent by 2005, up from a
current range of between 1.5 and five
percent depending on the vehicle type.
"With that kind of tax, we will all have to
close our business," said the VAMA
official.
Imported automobiles are currently
subject to tax rates of up to 100 percent.
Vietnam defended the higher tax as
necessary.
"The new tax is not aimed at hurting the
local automobile assemblers but rather
to allow fair competition between
Vietnam's auto producers and foreign imports as Vietnam is preparing to enter WTO and ASEAN's free
trade zone," an official from the General Tax Bureau told Reuters on Wednesday.
She also added that automobile assemblers should consider scaling back their "current thick margins"
to stay competitive.
While motorcycles are still the vehicles of choice for Vietnam's 80 million people, rising disposable
incomes have spurred purchases of cars. First quarter auto sales of the 11 foreign-invested firms rose
nearly 34 percent year-on-year.
Reuters - May 7, 2003.
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