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VAMA: Vietnam should think of lowering luxury tax
Dr Udo F. Loersch, Chairman of the Vietnam Automobile Manufacturers’ Association (VAMA), said that the government of Vietnam should think of lowering the luxury tax and apply tolls instead.
Mr Loersch, in a talk with Thoi bao kinh te Vietnam about the luxury tax bill, said that the suggested higher luxury tax would cause another shock to the automobile market, and that Vietnam should collect road taxes instead of raising the luxury tax.
The Ministry of Finance has suggested applying the high luxury tax rates of 50-70% on cars with less than 10 seats.
“The government should collect tolls to ensure that the more cars roll on roads, the more the owners of the cars have to pay,” he said.
The automobile manufacturers’ chairman does not think that it is a good idea to raise the luxury tax to limit the number of cars in circulation. In fact, the changes in the tax policies in the last two years have caused big changes to the market, and if the higher luxury tax rates are approved, the market would face another shock, and sales decrease sharply. This will certainly badly affect automobile manufacturers and Vietnamese clients.
Developed countries only impose VAT, while do not impose luxury taxes. Car should be seen as a means of transportation, not a big asset, therefore, it is necessary to think or lowering instead of raising the luxury tax.
According to Mr Loersch, the car taxes in Vietnam are the highest in the world and thus prevent the market from being able to expand. Meanwhile, in order to develop supporting industries, Vietnam needs a bigger market and lower taxes. The country only has 10-12 years ahead to develop the local automobile industry and supporting industries before it opens the market under its AFTA and WTO commitments.
The following is an excerpt of the interview:
The Ministry of Industry and Trade (MOIT) has released the forecast about the motorisation process in Vietnam The first stage of the process will be the pre-motorisation period, when there are less than 50 cars for every 1,000 people. When do you think Vietnam’s automobile market will be able to reach the scale for the first stage?
I think that the motorisation boom will take place as an inevitable result of the increasing consumption demand. If local automobile manufacturers and supporting industries do not develop as they need to, Vietnam will have to feed the demand by imports. This will lead to many undesirable consequences.
What are VAMA’s suggestions about tax policies, the tax on car part imports, on complete built units and luxury tax?
VAMA has made many suggestions to the government about tax policies. I have to repeat that after changing tax policies suddenly 10 times since the beginning of 2007, we should not do anything else that may harm the local automobile industry.
You once said that in order to develop the local automobile industry, local manufacturers need support from the government, especially support in policies. What are the policies?
In the long term, it will happen that every family owns a car, and then two or three. By that time, Vietnam’s market will be very big, and the automobile industry will be really big.
We won’t have an automobile industry if we don’t have clear goals and policies. As I said above, we should think of lowering the luxury tax step by step, while collecting tolls instead. Besides, we need to give investment incentives in order to help develop supporting industries.
VNN
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