Two new scenarios for special tax on cars
Giving opinions on the draft amendments to tax laws of the Ministry of Finance, some opinions suggested not to amend the regulations on the price for calculating special consumption tax (SCT) on passenger cars with 9 seats or less.
The reason is that this amendment will discriminate between imported and domestically produced goods, leading to a violation of commitments when joining the World Trade Organization.
No additional priority for domestic cars
Regarding the above opinion, the Ministry of Finance proposed two options. Option 1: The price for calculating special consumption tax on cars with nine seats or less is implemented according to current regulations. This means that the price for calculating special consumption tax on domestically produced cars with nine seats or less is the price sold by the manufacturing facility, excluding the value of domestically produced components and spare parts.
Option 2: Implement according to the proposed plan of the Ministry of Industry and Trade. Specifically, the price for calculating special consumption tax on domestically produced cars with nine seats or less is the price sold by the manufacturing facility minus the value of domestically produced components and spare parts. This option will help the price of cars produced and assembled domestically by enterprises have the opportunity to decrease 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.
Based on the above argument, the Ministry of Finance proposes to implement option 1. This means there will be no additional incentives for domestically produced vehicles using “made in Vietnam” components.
Increase tax on pickup trucks
Many opinions also suggested that the Ministry of Finance not increase special consumption tax on pickup trucks. The reason is that pickup trucks are used for business purposes, not for personal consumption.
However, the Ministry of Finance found that pickup trucks are larger in size and consume more fuel than passenger cars. However, due to low excise tax rates, design and amenities that are not inferior to passenger cars, they are increasingly popular and are chosen as an alternative to passenger cars.
Therefore, to ensure that the consumption orientation of this type of vehicle is consistent with reality, the Ministry of Finance proposes to keep the draft law as it is, that is, increase taxes on pickup trucks. This type mainly has a capacity of 2,000 to 3,000 cm3So if the tax rate is 55% for cars with nine seats or less, the tax rate for pickup trucks is 33%.
Thus, it can be seen that the opportunity for domestically produced cars to reduce prices is very slim. In addition, the price of pickup trucks will increase in the near future.
