Auto joint ventures escape from tax arrear collection

The proposal by the Ministry of Finance on the new way of taxing car part imports, which has got the nod from the Prime Minister in principle, will help automobile joint ventures to “get out of danger”: they will not have to pay the tax arrears of up to multi trillions of dong.

Finally, taxation bodies seem to have given way, and the automobile joint ventures, which were asked to pay tax arrears for the car parts they imported before, will not have to pay the tax arrears.

How to tax import car parts reasonably is the question which has been raised, after some automobile joint ventures complained that they were imposed tax in an unreasonable way.

The topic got especially hot after Honda Vietnam lodged a complaint to the Government and threatened to reconsider its investment strategy in Vietnam if it is forced to pay such a big tax arrear. The automobile joint venture was asked to pay 3340 billion dong in tax, or 160 million dollars, for the consignments imported in the last five years, because the manufacturer was found out as making wrong declarations about the sums of tax it should have paid.

Honda Vietnam is not alone. The list of the automobile manufacturers that have to pay tax arrears includes other big names such as Toyota Vietnam, Ford Vietnam, GM Daewoo Vidamco and Vinamotor.

The story began when customs agencies, referring to the Circular No 184, found out that the car parts imported by the automobile joint ventures did not have the separation levels high enough to be able to enjoy such low tax rates.

Under the current regulations, if the car part imports cannot meet the requirements on the separation levels stipulated in a legal document issued by the Ministry of Science and Technology, the importers will not be able to enjoy the preferential tax rates, while they will have to pay the tax rates equal to the rates imposed on CBU (complete built unit) imports.

The Ministry of Finance said that from 2005 to May 2010, government agencies did not have any complaints from enterprises about the regulations relating to the tax rates on car imports.

In May 2010, in the inspection tours made after the customs clearance, customs agencies found out that a lot of sets of imported car parts did not meet the stipulated requirements on the separation levels. Therefore, the agencies decided that the importers had to pay the tax rate of 82 percent on the car part imports instead of the preferential rates of 0-27 percent.

Honda Vietnam sent a dispatch to Vietnamese Deputy Prime Minister, Hoang Trung Hai, asking the Deputy Prime Minister to take strong instructions to relevant ministries and branches on the issue.

In the document sent to Hai, Honda Vietnam emphasized that the decision to collect tax arrears is not unreasonable.

The problem here is that the understanding of Honda Vietnam and customs agencies about the separation levels of the imports of Honda Vietnam is quite different.

The effort by the auto joint ventures to appeal against the decision on tax arrear collection has brought the desired effects. In the latest move, the Ministry of Finance has proposed to apply a new way of calculating tax, under which, the car parts which cannot meet the requirements on the separation levels, would bear the tax rates imposed on different car parts instead of the rate on CBU imports.

Thoi bao Kinh te Vietnam has quoted an automobile expert as saying that the new way of calculating tax is really a “way out” in the current circumstances. As the new way has been approved by the government, it is sure that the auto joint ventures have escaped from the risk of paying tax arrears.

Source: TBKTVN

Tags: Vietnam automotive, Vietnam automotive industry, Vietnam autos market, Vietnam car imports