Finance Ministry wants fewer incentives for auto industry
The Ministry of Finance has thrown its weight behind a removal of many incentives for automakers as a full-fledged auto industry has remained far-fetched despite all sorts of policy incentives over the past 20 years.
In a recent comment on a draft Prime Ministerial decision on regulations and policies for the auto industry development strategy, the ministry suggested phasing out a number of incentives for the industry.
The Ministry of Industry and Trade is in charge of drafting the decision, which should have been issued as the Government in July last year approved the auto industry development strategy towards 2025. However, this ministry has been late for the drafting of the decision.
The industry ministry said it needs more time and takes caution to draft effective incentives to underpin the development of the auto industry.
Commenting on incentives in the draft decision, the finance ministry said if tax incentives are maintained, the State budget would be affected while tax collections are in decline due to the country’s signing more free trade agreements, and its measures to protect domestic producers from foreign competition.
More importantly, tax incentives for auto manufacturers and assemblers over the past 20 years have not worked as the local auto industry has remained as underdeveloped as ever with a majority of auto firms importing parts from abroad for local assembly.
The Ministry of Finance does not approve of allowing those projects producing auto parts and assembling vehicles to benefit from the State’s preferential investment capital sources. The ministry said this incentive should go to manufacturers of key mechanical products and projects committed to supporting industries.
The ministry disapproves of tax exemptions for import of auto parts which are not made locally, and of preferential corporate income tax for auto production and assembly projects, except for those in remote areas.
Regarding special consumption tax, the ministry wants it to be adjusted down for under-nine-seat autos but up for luxury, big and fuel-guzzling cars.
The finance ministry suggested the Ministry of Industry and Trade and the Vietnam Automobile Manufacturers Association report to the Prime Minister plans for tax adjustment review and adjustment every six months.