Why amend the preferential import and export tariff?

Decree 125 contributes to the development of supporting industries for the automobile industry and other mechanical industries; contributing to increasing state budget revenue. Source: Internet.

Promote domestic automobile production

Decree No. 125 took effect from January 1, 2018, particularly the provisions on preferential import tax on imported automobile components, which has contributed to facilitating the declaration of export and import goods classification. This is reflected in the List of Export and Import Tariffs issued together with Decree 125. ASEAN countries, according to which HS codes of goods imported into Vietnam are united with HS codes imported into ASEAN countries, facilitating the uniformity of goods declaration among countries.

The tax rates prescribed in Decree No. 125 are to encourage the import of raw materials, uniformly apply tax rates on goods of the same nature, structure, utility and similar technical features. Import tax rates are gradually reduced from finished products to raw materials and the export tax rate gradually increases from finished products to raw materials, thus facilitating import and export activities.

Statistics show that in 2017, total import-export turnover increased by 21% compared to 2016 and 2018 by 12.6% compared to 2017. In 2018, export surplus was 7.2 billion USD, nearly 2.5 times higher than trade surplus of 2.92 billion USD in 2017 the highest in 10 years. Total export and import tax revenues in the first 11 months of 2018 reached 285,236 billion VND, an increase of 7.64% compared to the same period of 2017.

The application of Decree No. 125 has supplemented the 0% preferential tax policy for automotive components to remove difficulties for automobile manufacturing and assembling enterprises in countries when special import tax rates under the Free Trade Agreement ATIGA reduce to 0% from January 1, 2018. Conditions to enjoy the incentives of this Program are linked to the conditions of production and assembly of domestic cars with the aim of increasing market size, contributing to support Vietnam's automobile market to grow stably and sustainably. From the beginning of the year until the end of November 2018, the total volume of whole-built automobiles imported in the whole country decreased by 16.1% in volume and 19.8% in value compared to the same period of 2017. According to the sales report of the Vietnam Automobile Manufacturers Association (VAMA), the total sales of the whole market as of the end of December 2018 increased by 5.8% compared to the same period of the last year. According to data reported by enterprises participating in the Program (Toyota Company and Hyundai Thanh Cong Automobile Production Joint Stock Company in Vietnam, Truong Hai Company) has contributed the tax amount to the State budget in 2018 to increase by about 7,300 billion VND. The Decree has therefore contributed to promoting the development of supporting industries for the automobile industry and other mechanical industries; contributing to an increase in state budget revenue.

Adjusting inadequacies in tax rates

Despite many benefits, problems and shortcomings have also appeared. For example, the tax incentive program for automotive components only focuses on the category of fuel-saving cars while in fact, some enterprises produce and assemble other environmentally friendly cars like electric cars and hybrid cars. Therefore, it is necessary to amend this Program to supplement the categories of environmentally-friendly cars to qualify for the automotive import tax incentive program to contribute to encouraging the development of the industry. It is necessary to amend some regulations on the procedures for implementing the Preferential Program to solve problems arising in the implementation process.

Another shortcoming is that in 2018, the Prime Minister approved two important documents to guide the development of the industry. In these two documents, the Ministry of Finance is assigned to lead and coordinate in conjunction with the concerned ministries and branches, review and propose import tax preferential policies for key mechanical product manufacturing projects and study and report to the Government for consideration and adjustment of the supplies and equipment import tax system for mechanical machinery manufacturing to enhance the competitiveness of domestic enterprises. In order to implement these tasks, it is necessary to amend and supplement regulations on import tax rates of some key mechanical products in the Import Tariff.

In addition, after a year of implementing Decree No. 125, a number of recommendations of enterprises on export tax and import tax of some items have been generated. The Ministry of Finance is required to study and adjust the tax rates of some goods which have proposed recommendations to suit domestic production and contribute to support import and export activities in the context of integration.

In order to overcome the above shortcomings, it is necessary to amend and supplement Decree 125. According to the representative of the Tax Policy Department, the draft was completed by the agency and asked for public opinions. The goal that the agency drafted when revising the regulations is to improve the legal basis for effective implementation of the Export and Import Tax Law, improve national competitiveness, contributing to attracting foreign investment, promoting export production with high added value, thereby contributing to economic growth to better meet the requirements of the socialist-oriented market economy.