Vietnam Abandons Major Car Tariff Hike

by Mary Swire, Tax-News.com, Hong Kong

31 December 2002

Deputy director-general of Vietnam's General Department of Taxation, Dang Thi Binh An, has bowed to pressure from foreign automotive manufacturers by scrapping a plan to increase tax on imported car kits from 20% to 70%. The manufacturers, including Ford and Toyota, said it would have become impossible to earn a profit in the country.

Vietnam was trying to force its substantial foreign automotive sector to increase the use of locally made parts, hoping to buttress local competitiveness before the country enters regional trade agreements which would force down tariffs. But the foreign manufacturers said the move was too dramatic: "Right now some automakers are making a profit and some are losing money, but if this decision becomes effective, everyone will lose money," Ford Vietnam's deputy general-director Ngo Van Tuyen complained.

The manufacturers are sympathetic to Vietnam's policy of increasing local output of parts, but say that the size of the market is too small to justify major investment; sales of assembled cars are expected to total 26,000 in Vietnam this year.

"We would like to advance the discussion for the development of the industry, including localisation," said Toru Kinoshita, deputy managing director of public relations at Toyota Motor Vietnam. "We really hope we can discuss this further with the Ministry of Finance and other ministries."

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