The draft, which will be submitted to the National Assembly for approval in November, will extend the list of 13 luxury items regulated by the present law by adding tobacco products, cars of less than 24 seats, motorbikes of cylinder capacity of 175 cu.cm or higher, and electronic gaming machines.

Among these, cars will be the hardest hit, with the tax level levied on cars of 6-9 seats will be raised from the present 30 percent to 50, 60 and 70 percent, depending on their cylinder capacity.

Finance Minister Vu Van Ninh asserted that the proposed tariffs are still in line with Vietnam’s WTO commitments and expected to curb inflation and stabilise consumption trends in the long term.

Experts said the current tariffs on luxuries, already at a high level, have not been able to constrain the influx of these items into Vietnam over recent times.

In the first seven months of 2008, luxuries imports raised import turnover to US$51.9 billion, a year-on-year increase of nearly 57 percent, resulting in a trade deficit of US$15 billion, up 137.7 percent and equal to 40.7 percent of the country’s export turnover.

The import of CBU (completely-built unit) cars, the focus of the controlling policy, though on a decline as from the second quarter of 2008 due to three consecutive tax rises from 60 percent to 83 percent, still saw increases of 265 percent in value and 290 percent in quantity for the seven-month period.

Other luxury items such as clothing, handbags and perfume of world famous brands are also enjoying an annual growth rate of 30 percent in revenue. For mobile phones, their import turnover this year is forecast to reach a record of around US$1.3 billion.

According to the Vietnam Gold Business Association, the first half of 2008 saw 60 tonnes of gold imported while the quota for the year is 73.5 tonnes. It is forecast that Vietnam will have to spend around US$4 billion importing gold.