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Auto dealers launch promotions amidst tax hike
Price discounts and after-sale services are among the “storm of promotions” being launched by auto businesses who fear a market slump as an result of an increase in value added tax (VAT).
The newly-approved VAT Law, revised, which will come into force on January 1, 2009, doubles the rate levied on trucks and buses to 10 percent, meaning a price increase of anywhere between 4 million VND and more than 50 million VND per vehicle.
Business Director of the Truong Hai Auto Company Mai Phuoc Nghe complained of “numerous difficulties lying ahead with the recent tax adjustments”.
He said those hardest-hit would be individual customers, who must bear the full brunt of the tax increase, whereas business clients are immune from the effects of the policy, as they qualify for VAT reductions.
Therefore, Truong Hai company, with individual customers constituting 70 percent of its business, has good reason to worry about its market share as “clients are certain to carefully consider every purchase and their spending power will reduce,” said the executive.
In the “storm of promotions” for the year-end shopping season, Truong Hai company has launched a series of attractive offers such as paying full registration fees and partial bank loan interests. The company has also beefed up its range of after-sale services.
The Xuan Kien Auto Joint-Stock Company, which specialises in trucks, has decided to prolong its free registration fees programme beyond its previous deadline of June, 2008.
Tax Policy chief under the Ministry of Finance, Vu Van Truong, however, denied that the tax adjustments would have any impact on auto businesses, citing VAT repayment policies that apply to businesses.
While a war of words has been prompted by the new tax law, the auto market is showing signs of rallying, thanks to the macro-economy rebounding, bank liquidity improving and banking interest rates being lowered.
The seasonal increase in demand for transport at the end of the year, coupled with the psychology of avoiding tax hikes are other reasons why many people decide to purchase a vehicle during the final months of the year, said economists.
vna
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