A car factory in the central province of Quang Nam. Photo: Dinh Muoi
As the local auto industry is facing increased competition from imports, the Japan Business Association has urged the government to offer tax breaks and incentives to car manufacturers operating in Vietnam, including Honda and Toyota.
The association said car parts that have to be imported from outside ASEAN, especially from Japan, should be exempt from import duties, according to local media.
It also called for the Ministry of Finance to reduce luxury tax on cars with fewer than nine seats from the current 45 percent to 30 percent, starting on July 1 next year, and then to 25 percent from January 1 2018.
Automakers and car part manufacturers should also be given income tax incentives and financial aid, the association was quoted by news website Saigon Times Online as saying.
It urged Vietnamese government to announce a timeframe for import duty cuts on cars from other ASEAN countries, so that local manufacturers can adjust their production plans.
According to the association, information it has gathered so far showed that the tariff will be first reduced from 50 percent to 40 percent in January next year, and then to 30 percent one year later.
Import duties on ASEAN cars will be totally removed in January 2018.
It was not the first time the Japan Business Association urged Vietnamese government to take actions in order to help local automakers compete against cheaper imports.
At a meeting in June, the association warned that if local policies for the auto industry continue to be ineffective, the industry will hardly survive in 2018.
Moreover, increased imports will create the country's trade deficit and in the end, hinder economic growth, it said.
Its new proposals will be considered by the finance ministry, which is drafting amendments to tax laws for legislators to vote on in October.
Vietnam imported nearly 75,240 cars in January-August, more than twice the number recorded in the same period last year, according to statistics from Vietnam Customs. In terms of value, car imports hit US$1.191 billion, up 133.2 percent year on year.
The Vietnam Automobile Manufacturers' Association reported sales of 125,418 units in the first eight months, up 62 percent.