Debate over taxes on beer, cars
06-AUG-2008 Intellasia | Vietnamnet
Aug 6, 2008 - 7:00:00 AM
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Special consumption tax on automobiles, beer and air conditions was under discussion at a conference aimed at gathering feedback from enterprises on the revised Law on Special Consumption Tax held yesterday by the Vietnam Chamber of Commerce and Industry (VCCI).
Representatives from several automobile and beer enterprises said taxes on automobiles and beers should not be adjusted.
Director of the Tax Policy Department under the Ministry of Finance Vu Van Truong admitted that the current Law on Special Consumption Tax had "some shortcomings", although it has helped regulate production and consumption and ensure budget revenues.
"The law has not covered all commodities which must be subject to the special consumption tax such as motorbikes with cylinder capacity of over 175cc, and it still imposes low taxes on services that the State does not encourage such as casinos and computer games," said Truong.
Under the revised law, tax rates on cars will not only depend on the number of seats as in the current law, but also on cylinder capacity.
"The bigger the cylinder capacity, the higher the tariff," said Truong. "The purpose of the regulation is to encourage the usage of energy-saving vehicles. In addition, cars with high cylinder capacity are often very expensive vehicles."
The tax rate of 50% is expected to be applied to cars with less than 10 seats and with cylinder capacity of under 2,000cc, 60% to cars with cylinder capacity of 2,000cc to 3,000cc, and 70% to cars with cylinder capacity of over 3,000cc.
Cars with 10 to 16 seats will be levied a tax of 30%, and cars with 16 to 24 seats 15%.
"Automobile makers understand the government's target of taking urgent measures to curb inflation and lower the trade deficit, but the measures must help balance short-term and long-term benefits," said representative of Toyota Vietnam Pham Anh Tuan.
He said that law makers should maintain the old classification of cars depending on the number of seats and that the new classification was unsuitable. He said the new law did not take into account the difference in popularity of cars with less than five seats and 6 to 9-seat cars.
Honda Vietnam representative Ngo Viet Dung said he agreed with Tuan, suggesting that under five-seat cars should be taxed 45% instead of 50% as is the case now while 6 to 9-seat cars should be taxed 35% instead of the current 30%.
Motorcycles with cylinder capacity of over 175cc, and airplanes and yachts will be taxed 20%, except for airplanes and yachts used for business, commodities and tourists transport purposes.
Beer tax
A common tax rate of 50% will be applied to different kinds of beers ranging from draught to fresh beer, and from bottled to canned beer.
General director of the VFAM Vietnam Management Consultant and Training JSC Vu Xuan Tien suggested that draught beer and karaoke services should not be taxed as these product and services had become more popular and they were now not luxury products anymore.
Representative of the Viet Ha beer company also agreed that the government should not tax draught beer.
"Draught beer is a speciality of Vietnam in terms of both production technique and consumption habit, its concentration is low and it can not be exported or imported," he said.
Other representatives said the tariff on beer raised from 40% to 50% was too high, and would create a lot of difficulty for enterprises. They suggested that if taxed, the tariff should only be between 5 to 8%.
The revised law also regulates air conditioners with capacity under 90,000 BTU will be imposed a tax of 15%.
General Secretary of the Vietnam Electronics Industries Association Tran Quang Hung said air conditioners with capacity under 18,000 BTU should not be taxed or the tax should be lowered, as the commodity had been used more widely than before and did not consume much electricity.
Truong said tax on casinos and computer games would be raised from 25% to 30% and on golfing business from 10% to 15%, as golf was a type of high-class entertainment, attracting high-income earners.
At the conference, all representatives agreed that the new law should have a clear definition of special consumption tax and more clearly explain standards which would be used to define commodities subject to the tax so that tax payers would not be confused.
This is the third time that the law has been revised. The previous amended laws were issued in 2003 and 2005.
The new law, if approved by the National Assembly, will come into effect by April 1, 2009, except for regulations on alcohol and beer which will have new tariffs imposed as of January 1, 2010 so that alcohol and beer enterprises will have enough time to adjust production.
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