New developments, 2018 car prices have no way to decrease
The Ministry of Industry and Trade proposed not to levy special consumption tax on domestically produced auto parts to reduce the price of “made in Vietnam” cars. However, the Ministry of Finance disagreed.
Regarding the amendment of tax laws, the Ministry of Finance is calculating options related to the calculation of special consumption tax on automobiles.
Clause 1, Article 6 of the Law on Special Consumption Tax stipulates that for domestically produced goods and imported goods, the price is the price sold by the production facility or import facility.
However, according to the assessment of the Ministry of Industry and Trade, the above regulation has not really encouraged enterprises to increase the localization rate, and has not created conditions for domestically produced goods to compete with imported goods.
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| The opportunity to reduce the price of "made in Vietnam" cars will be more difficult. |
Therefore, on April 28, 2017, the Ministry of Industry and Trade issued report No. 34/BC-BCT on the assessment of the Vietnamese automobile manufacturing and assembly industry and development solutions. In which, there was a report related to the localization rate for personal vehicles with up to 9 seats, which is still low compared to the set target.
Therefore, the Ministry of Industry and Trade proposed to change the special consumption tax rate for domestically produced vehicles in the direction of not calculating special consumption tax on the value added created domestically (components, spare parts). This is to increase the competitiveness of domestically assembled products, encouraging car manufacturers to increase the value added content produced domestically.
Based on the proposal of the Ministry of Industry and Trade, the Ministry of Finance proposed 2 options related to the price for calculating special consumption tax on automobiles.
Option 1: The tax price for calculating special consumption tax on automobiles with 9 seats or less is implemented according to current regulations. Accordingly, the tax price for calculating special consumption tax on domestically produced automobiles with 9 seats or less is the price sold by the manufacturing facility (excluding the value of domestically produced components and spare parts).
Option 2:According to the proposed plan of the Ministry of Industry and Trade, the taxable price for calculating special consumption tax on domestically produced cars with 9 seats or less is the price sold by the manufacturing facility minus the value of domestically produced components and spare parts. If this plan is implemented, the price of cars produced by domestic factories will have the opportunity to decrease more if the proportion of "made in Vietnam" components is higher.
However, the Ministry of Finance finds that this option is not consistent with the National Treatment (NT) Rules stated in Article III of the General Agreement on Tariffs and Trade - GATT.
Specifically: Article III, paragraph 1: The Contracting Parties recognize that internal taxes and charges, as well as laws or regulations requiring the internal sale, offering for sale, transportation, distribution or use of products, and internal quantitative regulations requiring the mixing, processing or use of products in specified quantities or proportions, shall not be applied to imported or domestic products with the effect of affording protection to domestic products.
Article III, paragraph 5: No contracting party shall adopt or maintain any internal quantitative regulation which requires, directly or indirectly, a specified quantity or proportion of any product subject to the regulation to be supplied from domestic sources. In addition, no contracting party shall apply any internal quantitative regulation in a manner inconsistent with the principles set forth in paragraph 1.
This means that if implemented according to the plan proposed by the Ministry of Industry and Trade, it will create discrimination between imported goods and domestically produced goods, leading to violations of commitments when joining the World Trade Organization.
Therefore, the Ministry of Finance proposes to implement option 1, which means no additional incentives for domestically produced vehicles using "made in Vietnam" components.
Therefore, the chance for domestically produced cars using many domestic components to have a chance to reduce prices is very slim.Cheap cars are once again out of reach.
