Possible impacts of car part tax increase

The impending second car part tax increase is forecast to trigger a new price increase wave.

On May 14, Deputy Minister of Finance Do Hoang Anh Tuan signed a decision on raising the tax on car parts imports by 5-10%. The new tax rates will be applied for the customs declarations as of May 20.

The decision does not surprise automobile manufacturers, who have planned to raise sale prices to deal with the tax hike.

Experts have forecast a new price storm for domestically made cars.

A representative of Toyota Thang Long said that clients who signed contracts on purchasing cars prior to April 8 will get cars at previous price levels. Meanwhile, those who signed contracts after that will have to accept the new prices due to the car part import tax increase.

Under the new tariff, accessories like reflectors and glass mirrors have the tax rates of between 33% and 38%. Transmission equipment for radios and televisions has the tax rates of between 15% ad 37%, while electric equipment to protect electrical circuits, 10-29%.

The Ministry of Finance is also considering raising the import tax on import cars under the form of complete built unit (CBU) (the current tax rate is 83%). Reliable sources say that the increase will not be higher than 5%.

Analysts say that the supply of import cars is now profuse with many choices for clients. Meanwhile, locally made cars are scarce, and clients have to queue to get deliveries.

However, analysts have also warned about the decrease of purchasing power of domestically made cars. It is because banks have been tightening consumer credit, leaving buyers short of money to buy cars.

Forecast all say that the number of cars that automobile joint ventures will sign from now to July 2008 will decrease sharply.

Besides cars, other products, including electronic products and electronics accessories, are also subject to the tax adjustments in the time to come. The Ministry of Finance has set the new tariff on used car imports, which sees the increases of 11-33%, or $2,000-3,500/unit.

The ministry has also suggested raising the luxury tax from 50% to 60% on 2.0-3.0L cars and to 70% on 3.0L and bigger cars.

In the latest news, Minister of Finance Vu Van Ninh told the press on the sideline of the ongoing National Assembly session that the National Assembly Steering Committee does not agree with the government’s proposal to raise the luxury tax on cars. (VNE, TBKTVN)