Rushing to buy cars to avoid higher tax

The car market, which had been gloomy for many months, has suddenly heated up as people are rushing to buy cars to avoid higher ownership registration tax.

Let’s go purchase cars

According to the Ministry of Finance, from early 2011, the ownership registration tax rates on cars, private aircrafts, real estate and other valuable assets will be adjusted. Especially, the ownership registration tax on less-than-10-seat cars will increase to 20 percent from the current level of 15 percent.

In addition, the car prices in 2011 are likely to increase in accordance with the dong/dollar exchange rate, so the overall expenses will increase. The tax? increases are expected to be very high of up to hundreds million dong.

While people are still surprised at the registration tax increase to 20 percent, they are now stunned by another news that the fee for getting car plates in Hanoi and HCM City may increase to 20 million dong from February 5, 2011. Meanwhile, the motorbike plate fee will be four million dong instead of 500,000 dong.

Under the new tariff released by the Ministry of Finance, less-than-9-seat cars will enjoy the import tariffs of 82 percent and 77 percent instead of 83 percent. (The 82 percent tax rate will be applied to the cars with the cylinder capacity of 21.8-2.5 litres, while the rate of 77 percent to the cars with the cylinder capacity of 2.5 litres and higher). As for 4WD, the tax rate in 2011 will be 72 percent instead of 77 percent.

The information about the tax changes has prompted people to purchase cars in order to avoid higher tax.

Dat Viet newspaper quoted Nguyen Manh Huong from GM Daewoo’s sale agent on Le Trong Tan street in Hanoi as saying that at first sight, the import tariff reduction is inconsiderable. However, the biggest tax reductions are on the models with the cylinder capacity of 2.5 litres and higher, which account for a big proportion of import cars. Moreover, considering all kinds of tax, including luxury tax and VAT, the tax reductions would be attractive enough to recover the car market which has been gloomy for the last many months.

Meanwhile, a salesman of Topcar salon on Lang Road in Hanoi said that in fact, the demand for cars is usually big at the end of the year. However, the information about the new tax rates has served as an additional “catalyst”,. He estimates that the volume of cars to be sold in December would increase three times over the last month. Meanwhile, the sales agent of GM Daewoo on Le Trong Tan Street said that the sales would increase 4-5 times.

Car importers sad

Many people believe that the import tariff cuts would be the good news for importers,. But in fact, the happy people are automobile joint ventures.

Explaining this, a salesman of Thien Bao Anh showroom on Le Van Luong said that at this moment, popular models are most popular; however, the models mostly have the cylinder capacity of less than 2.5 litres, which means that they will enjoy the modest one percent of the tariff reduction. Therefore, the modest tariff cut is inconsiderable to help boost sales.

Nguyen Quang Minh, Director of Hoa Binh Company, said that in fact, by cutting the tariff, the Ministry of Finance wants to reduce the pressure on the trade deficit, not to heat up the car market, as people think.