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Car ownership registration tax down, people counting losses   2009-04-29 - VietNamNet/VNE

Those who rushed to purchase cars before April 1 to avoid the high luxury tax rates might regret their purchases, as car ownership registration fees have unexpectedly been lowered to 5-6% again.


The prime minister has released a decision on reducing the car ownership registration fees to 5-6% from the current rates of 10-12% which have been applied since April 1, 2009. The 5-6% fees will be applied from May 1 until December 31, 2009.


The fee cut is considered a measure to help stimulate demand and encourage investment, prevent economic recession and help enterprises overcome difficulties.


The government has also decided to cut the VAT rate by a half on some commodities including fibre, cloth, garments, footwear, paper and paper products, books of different kinds, cement, motorbikes. The tax rates being imposed on these products are 5-10%.


Besides the tax cuts, the prime minister has also approved a delay in the collection of personal income tax and reduced the corporate income tax that enterprises in some business fields have to pay in Q4 2008 by 30%.


The car ownership registration fee reduction has been applauded by many people who plan to purchase cars, and car manufacturers. However, it has made many others wistful as they paid a lot to get cars before April 1.


Thu, a staff of a foreign company, who is now living in Hanoi, related that one month ago, she and her husband hunted high and low for a Toyota Fortuner V. The manufacturer’s suggested retail price was $41,000, but they had to pay $4,800 more to the sales agent in order to get the car before April 1, when the new luxury tax rates were to go into effect.


“We have lost some VND100mil in the last one week because of the ownership registration fee decrease,” Thu said.


Phuong, who lives in Quoc Tu Giam ward in Hanoi, related that he has lost several tens of million VND in the last two weeks. He borrowed money from relatives to purchase an imported Kia Morning at over $19,000 before April 1.


People rushed to purchase cars in the last days of March and sales of MPV/SUVs soared to 4,301 cars in the month, double that of February, a figure never seen before in the history of Vietnam’s car market. Import models also sold like hot cakes.


“As happy as selling cars in the period before the tax increases” are words which describe the feeling of car dealers. However, the tax policies have made at least the general director of one automobile joint venture in Vietnam breath a sigh of relief. “I have never heard of any other country in the world changing car taxes so regularly as Vietnam,” he said.


Car dealers also complain that they always have to ‘bet’ on tax policies, because they cannot anticipate how tax policies will go. The tax rates may unexpectedly go up, and then suddenly go down.


However, it is undeniable that the automobile manufacturers got fat profit from the information about the luxury tax increase. The tax increase plan helped them sell out many seven-seater models.


People once predicted that the market of seven-seater cars would be gloomy after April 1, as people would not purchase cars when the luxury tax rates became higher, and that automobile manufacturers would be idle. However, they have been, once again, rescued by a new policy, the lower car ownership registration fees. The new decision will help the members of the Vietnam Automobile Manufacturers’ Association to live well for at least six months more.

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