Auto tariffs – are they up, down or unchanged

Vietnam’s car dealers are perplexed by a newly-promulgated import tariff on used cars that seems to roll back the rates to 2006 levels.

Circular #216 signed by Deputy Minister of Finance Do Hoang Anh Tuan on November 12 says that beginning January 1, 2010, ‘passenger-carrying vehicles with less than 15 seats’ . . . will bear the fixed tariff rate stipulated in the Decision No 69 (2006).

Decision 69 sets up a tariff on imports of used cars and allows the Ministry of Finance to raise or lower it by 20 percent.

Meanwhile, if referring to the Decision 69, stipulating tariffs on used cars, car dealers have realized that the majority of vehicles will enjoy the tariff decrease, while only a few models will see the tariff increase by some $2,000 per unit.

Under Decision 69, models with five seats and less and cylinder capacity of less than one litre, have an indicative tariff of $3,000. Models with the cylinder capacity of 1.5L to 2.0L bear an indicative tariff of $7,000. Meanwhile, the models with higher cylinder capacities will bear a tariff of from $10,000 up to $25,000 (for models of more than 5.0 liters).

Comparing the tariff schedule stipulated in Decision 69, with the rates stipulated in Decision 23 of May 8, 2008, that Vietnam is currently applying, it appears that the tariffs will decrease from $500 to $5000 per car seating five persons or less.

Similarly, the tax on models with six to nine seats will apparently decrease by $1.800 to 4,000.

Car dealers agree that if the import tariff decreases by $5,000 on average, the price of cars may decrease by up to $7,500.

Here’s the problem: car dealers are not sure they have properly interpreted the decision of the Finance Ministry. They are having trouble imagining why tax rates will be rolled back to the levels that prevailed in 2006.

VnExpress quotes a car company owner in HCM City. Recently the Ministry of Finance has stressed its intention to maintain policy stability and minimize changes in the tariff, he says. For example, the Finance Ministry opposed the Ministry of Industry and Trade’s proposal in September to raise tariffs on imported cars. “That’s why I have some doubts that this tax decision will upset the present policy.”

A car importer in Hanoi known for his caution says that he has polled his contacts, asking if the tariffs will increase or decrease and why the Ministry of Finance has released a decision on tax imposition at this time.

The car importer stressed that a tariff decrease would be ‘abnormal’ under current conditions, when Vietnam is worried about a widening trade deficit. He thinks that surely Government does not want to encourage used car imports right now. “However, all my contacts – and these are well-informed people – are equally perplexed. Some of them do not believe in the new tax schedule is for real,” he said.

VnExpress adds that the General Department of Customs has stressed that it has not received any instruction relating to the changes in the tariffs on used cars and, as far as it knows, the tariff on imported used cars to be applied in 2010 has not changed. The Customs Department is a unit of the Finance Ministry.

At the ministry, there’s surprise at the various conflicting interpretations. One official says that the 2010 tariffs will be the same as they are currently, and that he can’t imagine why Circular #216 has stirred up the auto sector. He added that the Finance Ministry will reexamine it and issue further guidance.