Diverse SCT rates on cars proposed

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As of now, automobiles with a cylinder capacity below 2.0L incur a special consumption tax (SCT) rate of 45 per cent; those with a cylinder capacity between 2.0 and 3.0L are subject to 50 per cent SCT rate, while the rate of 60 per cent is applicable to automobiles surpassing 3.0L.

About a month ago, Truong Thanh Hoai, head of the Ministry of Industry and Trade’s Heavy Industry Department was quoted as saying to local media that the ministry (MoIT) may propose sharply raising SCT rates on automobiles above 3.0L in cylinder capacity.

Specifically, the SCT rate would be divided into four levels: automobiles from 3.0L to 4.0L in cylinder capacity will be subject to a SCT rate of 120 per cent, while the rates of 145 per cent, 170 per cent and 195 per cent would be applicable to automobiles with cylinder capacities between 4.0 and 5.0L, 5.0L and 6.0L and above 6.0L, respectively.

For automobiles below 1.5L in cylinder capacity the proposed SCT rate would be lowered to 30 per cent.

In a recent meeting earlier this month, Nguyen Ngoc Thanh, deputy head of the Heavy Industry Department stated that the MoIT considers increasing SCT rates on automobiles beyond 3.0L in cylinder capacity from the current 60 per cent to 70 per cent and lowering the rate applied to cars below 2.0L from the current 45 per cent to 35 per cent.

These different proposals all came from the groves of the MoIT which was tasked by the government to join hands with relevant governmental bodies and pen draft policies to materialise Vietnam’s auto industry development strategy.

The strategy was rubber stamped by the government last July.

Many MoIT proposals on revising SCT rates on automobiles, however, were not applauded by the Ministry of Finance (MoF).

Earlier, in November 2014 when commenting on MoIT tax policy proposals for the implementation of the auto sector development strategy, the MoF markedly distanced itself from advocating the MoIT’s SCT tax revision proposals.

The MoF argued that following Vietnam’s commitments to economic integration many tax lines on imported components would need to be eased down, casting a dent on state coffers.

Besides, corporate income tax (CIT) rates are expected to fall to 20 per cent by 2016. In the context of a lower import duty and CIT rate, reducing SCT rates on automobiles would lead to lower budgetary revenues.

This partly explains why SCT rates on automobiles have remained unchanged when it was submitted for consideration to the National Assembly’s final section late last year.