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Used cars still arriving despite tariff barrier
Used cars are still arriving in Vietnam despite the increased import tax and the government’s policies aiming to reduce the trade deficit.
According to the General Department of Customs, 35,000 vehicles were imported into Vietnam in the first half of the year, including cars, MPV, trucks and buses. The figure, comprising 19,000 brand new and 15,400 used cars, was five times higher than that of the first half of 2007.
10 Rolls Royce Phantoms have arrived so far this year, or nearly double that of 2007. It is estimated that there are some 20 Rolls Royce Phantoms in Vietnam, most of which are used imports, while some brand new units were brought to Vietnam when the import tax was 60%.
As for other luxury models like Lamborghini, Ferrari, Mercedes SLR McLaren, 100% of the imports were used products.
13,000 units with less than 9 seats arrived in the first half: 2,500 used and 10,500 brand new units.
As such, since the decision on lifting the used car import ban came into effect in May 2006, some 11,000 used cars have arrived in Vietnam, mostly luxury and high-end models.
Explaining why used super cars are still arriving in Vietnam, a businessman said that it is because of the big gap in the tax rates imposed on brand new and used imports. For example, a used 6.0L Phantom priced at $300,000 will bear the fixed tax of $30,000, while a brand new unit of the same model 83%, or $249,000 – eight times higher than the tax on the used car.
Counting the luxury tax (50%) and VAT (10%), the post-tax price of the brand new car would be $360,000 higher than the price of the used car. The big gap of the tax has prompted people not to import brand new cars at this moment.
Head of the Finance and State Budget under the National Assembly Finance and State Budget Committee Bui Duc Thu has expressed concern over the massive number of used car imports. Thu said that imports of used cars need to be more strictly controlled to avoid making Vietnam a place of industrial waste and environmental pollution.
Thu said the Luxury Tax law is being amended; it will be submitted to the National Assembly in October.
In related news, the Ministries of Finance and Industry and Trade are compiling a list of imported commodities which the government needs to control. The commodities include gold and gemstones, cars and car parts.
Deputy Minister of Industry and Trade Bui Xuan Khu said that the ministry will take drastic measures (raising taxes, requesting compulsory import stamps or licencing import) to control the imports of products which are not essential at this moment.
According to GDC, export turnover in June was around $6.2bil, an increase of 49.1% over June 2007. This represents the highest-ever monthly export growth rate. Total export turnover in the first six months of the year was $30.6bil, up by 35.8% over the same period of last year.
Meanwhile, import turnover in June 2008 reached $6.925bil, a considerable decrease compared to April ($8.23bil) and May ($7.67bil). As such, the trade gap in June decreased to $715mil from $3.2bil in April.
VNN
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