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FM tax decision may force some auto importers to bankruptcy
The Ministry of Finance’s decision to collect an increased tax on vans imported before July 21, 2008, may make big importers lose billions of dong and put smaller ones on the verge of bankruptcy.
The problem lies in the fact that initially, imported vans were classed with trucks, and taxed at 0%. Later, the Ministry of Finance recategorized them as passenger vehicles subject to a luxury tax of 15%. The Ministry ordered ordered importers to pay retroactive tax on the vans, even though the importers had already sold all the vans on the market.
Originally under the Special Consumption Tax Law that was in effect until April 1, 2009, the luxury tax of 15 percent was only imposed on passenger vehicles less than 24 seats. Vehicles used to carry cargo were not subject to the luxury tax. ‘Vans,’ defined as having the function of carrying passengers and having a cargo hold, although they resemble a passenger carrying vehicle, were classed with trucks as not subject to the tax for many years.
Then, on July 21, 2008, the Ministry of Finance unexpectedly released Instruction No. 8543, requesting customs agencies to impose tax on vans at the 15 percent level. In turn, the General Department of Customs issued Document No. 3531 on July 25, 2008, instructing local customs agencies to collect the tax on vans imported before July 21, 2008 retroactive to January 1, 2006.
According to customs agency statistics, 1,174 vans were imported during that period, which meant that the tax arrears customs agencies intend to collect is about 26.6 billion dong.
Businesses weep
One of the van importers which suffered most heavily from the revision of tax liability is the HCM City branch of Ha Long Seafood Corporation.
Luong Duc Cuong, Head of the Import-Export Division of the branch, says that the corporation has to pay tax arrears for 176 imported vans, totaling 6 billion dong.
“It is not our fault, but we have to bear the consequence. How can we get money to pay the tax?” Cuong said.
He added that his company will not be able to arrange enough money to pay the tax, even ifit is allowed to delay the tax payment.
An Viet Company reports that it imported over 100 vans for which it now has to pay tax arrears of 4 billion dong.
The importers of special purpose vehicles like ambulances and prisoner transports have also been instructed to pay tax arrears.
Bankruptcy seems to be the best way out
A staff of a HCMC importer, Sao An Lac Automobile Co, said that it imported 76 special purpose vehicles between early 2006 to mid 2008 and sold them all. He added that “if the Government and is determined to collect tax arrears, we will only have choice: bankruptcy. The luxury tax arrears we will have to pay – over $700,000 -- is much higher than our chartered capital.”
Sources said that some small companies which have imported only few vans have decided to pay tax arrears to ‘hush up the affair’ and shifted to other kind of business.
The sources also said that a company in the north that had imported 200 vans and was liable to pay tax arrears, has stopped operation after it dispersed and hid its assets.
Pham Ngoc Doan, head of An Viet Company, said that small companies may dissolve and then reregister as new businesses if the Government insists on collecting tax arrears, while they will not pay unjust tax.
“Only well-established businesses like ours, which do not want to be dissolved, will suffer. We still do not know where we will find 6 billion dong to pay tax, when we have sold out all the imported vehicles,” said Cuong of Ha Long Seafood.
VietNamNet, VnMedia
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