Auto industry association calls for rethink on tax policy.
The Vietnam Association of Mechanical Industry (VAMI) has proposed the Prime Minister and the Ministry of Finance adjust import taxes on completely-built-up (CBU) truck units to bring them in line with those on completely-knocked-down (CKD) truck units.
VAMI said that when importing CKD components to manufacture automobiles, domestic firms must still pay other costs, such as investments in production and assembly lines and costs for the management and training of workers on the assembly line. Enterprises also say that the price of importing CKD components is higher than the price of importing CBU units, due to strict conditions of foreign suppliers.
The above costs and higher import taxes on CKD components make the production cost of every type of truck assembled in the country increase by 24 per cent compared to imported CBU units. On the other hand, after importing CBU units, enterprises only have to pay some insignificant costs and the truck is then ready for sale.
“To earn a profit, firms will shift to importing CBU trucks,” said Mr. Dao Phan Long, Vice President of VAMI. “The mechanical manufacturing and assembly of trucks will be more vulnerable. At the same time, tax revenues to the State budget will fall.”
Due to the high localization ratio, trucks are still considered a successful part of Vietnam’s automobile industry. The localization ratio of light trucks at Vinaxuki and Thaco stands at about 50 per cent and 30 per cent, respectively.
However, with the current import tariffs on CBU trucks from China, the market share of truck assembly firms will be significantly affected.