News Room - Business/Economics

Posted on 18 Mar 2008

Up and down vehicle taxes hurt industry

Announcing last week that it had followed the Government’s instruction to reduce the number of traffic jams, the Ministry of Finance raised import taxes on new and used vehicles.

The 10 per cent tax increase is expected to be applied at the end of this month. This is the fourth time within one year the Government has changed the tax rate for new and used imported vehicles.

After Viet Nam joined the World Trade Organisation in January 2007, the finance ministry reduced the import tax for new vehicles from 90 per cent to 80 per cent. In August last year, the rate fell to 70 per cent, and in November, the tax was imposed at 60 per cent.

Vo Van Ninh, minister of finance, last year was quoted as saying on the online news site Viet NamNet that the second tax reduction import taxes were reduced again local manufacturers would cut their prices.

Yet the price of locally assembled cars didn’t go down.

However, the tax reduction did increase the number of imported vehicles into Viet Nam.

With the stereotypical belief that vehicles manufactured overseas are of better quality, many Vietnamese prefer to order from abroad.

In addition, it takes about five months for local vehicle manufacturers to deliver the cars while the waiting time for the imports is about two months.

The General Department of Customs reported that over the last two months, about 6,000 vehicles had been imported into the Vietnamese market which is similar to the figure of last year’s first eight months.

VietnamNet reported that, in January, while Toyota Viet Nam sold 406 domestically manufactured Camry 2007 cars, the imported figure for the same model was 420.

Last month, 294 Camry cars were imported while local sales reported 200.

Just within one year, the import tax was first reduced so local manufacturers would cut prices, and then was raised to reduce traffic jams. This policy inconsistency is confusing businesses and consumers.

In the end Vietnamese consumers will be hurt most because car importers have already announced a price increase of 6 to 15 per cent.

Fisheries feel dollar effects

While car importers can ask their customers to pay higher than the ordered price to avoid losing profits, fisheries exporters are facing a different dilemma.

Last week, the Viet Nam Association of Seafood Exporters and Processors (VASEP) sent an urgent report to Minister of Agriculture and Rural Development Cao Duc Phat about the problems its members are encountering due to the devaluation of the US dollar.

According to VASEP, few banks are enthusiastic about buying US dollars, which is the only foreign currency VASEP’s members receive from their clients for the export seafood. Many exporters now have the dollar, but still have to borrow Vietnamese dong at a high interest rate of 1.1 – 1.4 per cent a month.

Those who are lucky selling with dollar also lose about VND60 million (US$3,750) for an order worth $200,000. That’s because of the present interest rate of VND15,700 on a US dollar compared to the rate of VND16,000 when the contract was signed. Besides, the banks now charge a 2 per cent fee when they buy US dollar from businesses.

VASEP said that its members must bear losses to meet the terms of signed contracts with their foreign clients to maintain their relationships.

VASEP said that to make up for the losses, seafood exporters would have to reduce their purchases or buy at lower prices. VASEP said that in the long run farmers would invest less in the coming seasons and as a result would affect the country’s seafood export turnover.

In its report, VASEP said the State Bank of Viet Nam should support seafood exporters by asking commercial banks to buy the foreign currencies VASEP members have obtained from exports at the Government’s rate, without charging a fee.

In addition, the Government should require commercial banks to reduce the lending interest rate of the dong for seafood processors and exporters. This would cover costs and allow farmers to pay for oil price increases so they can maintain production.

Viet kieu enter the market

If the Ministry of Construction’s proposal to the Government last week is approved, any overseas Vietnamese will be allowed to own property in Viet Nam.

Even though the Vietnamese Land Law paves the way for Vietnamese expatriates to own a house or an apartment in Viet Nam, the requirements are demanding and the procedure is complicated.

In the amendment of Decree 90/2006, the construction ministry said that any Vietnamese residing overseas but still maintaining his or her nationality will have all the rights and responsibilities like any Vietnamese living in Viet Nam. Thus the construction ministry proposed that Viet kieu should have the right to own as many houses as they can afford, just like Vietnamese.

The right to own as many properties as they want is also proposed for people of Vietnamese origin who used to have Vietnamese nationality or whose parents or grandparents are Vietnamese. They also need to be long-term investors, revolutionary contributors, scientists or experts and who want to settle in Viet Nam, according to the law.

Meanwhile, those who don’t want to move to Viet Nam on a long-term basis and who have lived in Viet Nam for more than six months can own a house or an apartment.

According to the Ministry of Construction, since Viet Nam allowed expatriates with restricted qualifications to buy a house in Viet Nam two years ago, only 137 people have been able to buy a property legally here. About three million Vietnamese expatriates are living all over the world.