Competitors cry foul as car maker gets a tax break

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Auto industry insiders say authorities have given an unfair tax advantage to Hyundai Thanh Cong, allowing the car maker to import whole frames at low tariffs applicable only to separate components.

According to Hyundai Thanh Cong, which assembles and imports models of the South Korean car maker Hyundai, the company was allowed to import the partially completed car frames at preferential tariffs as its factory in the northern province of Ninh Binh is still in a test run period.

The imported 5,000 sets would be used for cars of between five and seven seats, an official of the company said, citing a notice from the Ministry of Science and Technology.

Do Hoai Nam, who heads the industrial assessment division at the ministry, confirmed the decision. "Foreign-invested companies used to be given tax incentives on a certain number of cars when they were in the process of studying the market. Hyundai Thanh Cong is a local company and the case was considered based on a proposal from the provincial authorities."

"There is nothing special about this," he told Thanh Nien.

Vietnam offers low import tax rates of between 5 to 20 percent on separate auto parts as an incentive to support the local car industry. If the components have already been combined into larger sets, they will be subject to tariffs of 20-37 percent. For completely-built-up cars, the tax rates can be as high as 83 percent.

Luu Van Dat, an industry expert, said auto joint ventures were usually allowed to import only 300 component sets for trial production, so it's not fair to give Thanh Cong 5,000.

Dat also suspected that there was some kind of tax cheating involved. The imported components may have once belonged to complete cars and were being brought into Vietnam to be reassembled, he said.

Thanh Cong chose to import the component sets via a seaport in the southern province of Ba Ria-Vung Tau, which is 1,800 kilometers away from its factory, despite its proximity to a major seaport in Hai Phong, Dat said, calling this a suspicious move.

Nguyen Hung Minh, deputy general director of Truong Hai, which assembles vehicles including South Korean KIAs and Hyundais, said by allowing Thanh Cong to import car frames that have been welded and painted, the authorities have created an unhealthy business environment with an "ask and give" mechanism.

Minh said the two models assembled by Thanh Cong Hyundai Sonata and Hyundai Santa Fe have Korean vehicle identification numbers engraved on their frames, which means the cars have been completed overseas already.

"Hyundai Thanh Cong is taking advantage of policy gaps, unfairly competing with other companies and seriously hurting the prime minister-approved plan to develop the local auto industry," he said.

The Ministry of Science and Technology has said that, at the end of this year, when its one-year trial period ends, Hyundai Thanh Cong will be inspected to see whether it has violated regulations.

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