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August 22, 2008

Vietnam to raise car taxes as sales climb
Vietnam Finance Ministry plans to increase the special consumption tax for buyers of cars by as much as 20 percentage points as part of efforts to cut fuel consumption and reduce traffic congestion, Reuters quoted the ministry as saying.

Under a draft law, the taxes would be raised to 60 percent for consumers who buy cars with 2.0 to 3.0 litre engines and 70 percent for cars with engines bigger than 3.0 litres, from 50 percent now, according to the ministry’s report released Thursday.

The new tax regime is expected to be approved by the National Assembly, the country's legislative body, in November this year.

In addition to the consumption taxes, car buyers are also subject to a registration fee of up to 15 percent and 83 percent import tariffs for imported vehicles, making car prices in the Southeast Asian country one of the world's most expensive.

However, sales of vehicles have been robust lately in Vietnam, with a population of more than 86 million, has only about 1.1 million cars and 21 million motorcycles but the roads are too congested to accomodate more cars.

Despite the steep price tags, which see the popular Honda Civic sedan retailing at nearly $40,000, the country's automobile sales more than doubled so far this year to more than 77,000 vehicles compared to the same period last year as more moneyed consumers traded motorcycles for cars, Reuters said.

At the annual car show, officially named "A Dream Comes True", that kicked off in Hanoi on Thursday, thousands crowded around the latest models from foreign car makers that have opened factories in Vietnam including Ford, Toyota, Honda, Mercedes Benz, Fiat and Isuzu.

The five day event is expected to attract 120,000 visitors, the Vietnam Automobile Manufacturers’ Association (VAMA) and AFTA Co, organizers of the event, which displays an array of vehicles over a 12,000sq.m space.

In related report, state news agency VNA quoted said a forecast at a seminar on Thursday as projecting a boom in car use by 2020.

The seminar, held by the Heavy Industry Department of the Ministry of Industry and Trade (MIT) in Hanoi, said that 2020 would mark the start of a boom period for Vietnamese auto demand with a rate of 38 cars per 1,000 population that will increase to over 50 cars per 1,000 population by 2025.

It added that cars of less than 9 seats will lead the period, helping to boost car manufacture and assembly as well as auxiliary industries, and reduce trade deficit.

According to the MIT, to anticipate the demand increase, Vietnam should boost the domestic car industry by focusing its resources onto the strategic segment of cars of less than 9 seats. In addition, the government should have policies to protect the domestic market by levying high taxes on CBU (completely-built unit) cars before its Asean Free Trade Area (AFTA) commitments will be applied in 2018.

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