MOF unexpectedly slashes tariffs more sharply than expected

Car importers complain that they made mistakes in their business plans because they did not predict that the Ministry of Finance (MOF) would slash the sharply import tariffs even more than previously planned.

A lot of car importers said that they did not anticipate that the car import tax would decrease as of January 1, 2011, therefore, they accidentally imported cars sooner than they should have.

On December 10 importers said that they were only informed about the new tariffs on the same day it was announced. Meanwhile, the imported cars are en route to Vietnam already and they are likely to arrive soon. The importers said they have decided to keep the cars at the arrival ports and will request customs clearance after January 1, 2011 in order to enjoy the new lower tariffs.

The problem lies in the fact that compared to the drafted tariffs the official new tariffs apply sharp reductions to most car models, especially 4WD and models with a cylinder capacity of 2.5 liters or more. Especially, a car model, which initially had an 83 percent tariff, will have a reduced tax rate of 77 percent.

Car importers also said that they could never have imagined that MOF would slash import tariffs more than previously planned. When drafting regulations on the new tariffs, MOF intended to slash tariffs on ASEAN sourced vehicles only. Meanwhile, the official tariffs show that sharp tax cuts have been applied to cars from WTO-member countries as well.

Director of a car trading company in HCM City said that after hearing the news about the tariffs, he has been like a cat on hot bricks. He has ordered his business division to analyze the new tariffs to determine the impacts of the new tariffs on sale prices, so that he can both adjust sale prices and adjust business plans.

The unexpected tariffs cuts have put car importers and dealers on the offensive, because they can set up their business plans most properly.

The director has affirmed that his company will only receive import cars after January 1, 2011, because he does not want to purchase cars now and pay higher taxes. The businessman calculates that every day, he will have to pay 500,000 dong in the storage fee. If every container can contain two cars with a cylinder capacity of less than 2.5 liters, he will have to pay the total fee of 10 million dong in storage fee for 20 days. However, since the company can benefit from lower taxes after January 1, 2011, he will be able to break even. As for the cars with a cylinder capacity of more than 3.0 liters, his company will enjoy bigger profits if he gets customs clearance after January 1, 2011.

The owner of a car trading company in Hanoi also said on Friday that a consignment worth tens million dollars of his company is arriving in ports in a few days. His company would rather pay fees to keep imports at the ports rather than paying higher taxes.

“Buyers always expect sale price reductions when they hear about the tariff cuts. However, the problem is that we still have the cars which were imported before and imposed the old tariffs, and we cannot slash sale prices of these products” he complained.

He went on to say that the imported car market will be very quiet in the last days of the year. Therefore, instead of leading customers to car showrooms, importers would lead them to the ports, where customers can see cars in person to make decisions.

At least three import car companies said they have begun calculating the sale prices for the new imports which bear the new tariffs. With the car models with the cylinder capacity of less than 2.0 liters, the total tax they have to pay about 190.29 percent. It is estimated that the sale prices of import cars will reduce by 0.8 percent.

Meanwhile, as for the models with the cylinder capacity of 2.0-3.0 liters, the total tax importers have to pay will be 200.03 percent, and the sale prices would reduce by 0.9 percent. As for cars that hold 3.0 L or more, the figures would be 211.5 percent and 4.4 percent.

For example, a Toyota Yaris will be reduced by $121.6, a Camry $345.6. The models with cylinder capacities over 3.0L, like Venza, will see the prices drop by $1019, Lexus $2270, Accura $3000. However, analysts say the price reductions will not be applied for used cars.- VnExpress

Tags: Vietnam imported car tax