Car importers face obstacle course

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Reality shows that less than nine-seat luxury cars are usually imported into Vietnam in the form of secondhand cars to ease tax payments.

Accordingly, most used cars currently incur only unit tax rates while brandnew ones suffer tax rates of 80 per cent.

Some firms made use of these regulations to shirk taxes, according to the General Department of Customs (GDC). In fact, a large number of used cars imported into the country are brandnew cars as the importers deliberately adjusted the cars’ counter metres to turn brandnew cars into used cars. In light of current regulations, used cars are those which registered for at least six months and travel at least 10,000 kilometres before reaching Vietnamese ports.

Imports of used luxury cars rose sharply in both volume and value in the last few months, according to the GDC.

“Import and usage of luxury cars among highly-paid people was growing quickly, making the application of existing tax rates towards used cars, no longer appropriate,” said GDC’s Department of Import Export Tax deputy head Luu Manh Tuong.

However, things will change from August 15, 2011 when the import duty of less than nine-seat used cars will shoot up sharply pursuing Decision 36/2011/QD-TTg. The price of used cars is said to be equal or even higher than that of brandnew cars as many kinds of used cars will incur both ad valorim tax and unit tax rates.

In this context, a number of commercial firms specialising in used car import are in dire straits. “We could not sell out the car volumes we imported after Lunar New Year in early February. Our firm faces changing business lines if used cars’ import rate will be hiked from mid-August,” said Duc Phat Import Export Company Limited’s deputy director Nguyen Thi Bich Lan.

Despite facing sharp reactions from car importing firms, the leadership from the GDC, the ministries of Finance, Industry and Trade said hiking used car import tariffs was essential to expedite the government’s target to curb the trade deficit.

Parallel to tax hikes, the customs bodies also issued a warning preventing businesses from tax evasions through making false declarations.

The customs sector will put used cars’ taxable prices under the microscope, according to the GDC. It has developed a price database of brandnew cars.

The taxable price of used cars will be set based on that of brandnew cars of the same version with a deduction of 10 per cent of the amount for one year of usage from the date of manufacturing.