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Automobile manufacturers entreating government for help   2008-12-15 - VNE

Local automobile manufacturers have sent a dispatch to the government, asking for a delay of the implementation of the VAT Law until July 1, 2009, or six months later than currently scheduled.


The Value Added Tax (VAT) Law, to go into effect on January 1, 2009, stipulates that automobiles, including commercial vehicles, will bear the tax rate of 10% instead of 5% as currently applied. However, commercial vehicle manufacturers think that it is unreasonable to set the single tax rate of 10% on both commercial vehicles and cars, while commercial vehicles are mainly used by small- and medium-sized enterprises to provide public transportation services.

When the VAT increases from 5% to 10%, manufacturers will have to naturally increase sale prices, which will make it more difficult to sell products, especially as customers are trying to tighten their purse strings.
This had prompted domestic automobile manufacturers to propose the delay of the VAT law’s implementation until July 1, 2009.
Tran Ba Duong, General Director of Truong Hai Automobile Joint-stock Corporation (Thaco), said that the commercial vehicle market has been falling continuously since July with sales down by 70%.
Duong said that the corporation now owes VND825bil to credit institutions. Meanwhile, since September, the corporation has incurred the loss of VND7-8bil every month.
Truong Hai now has a big stock of automobiles worth over VND1,500bil. Duong said that if everything goes smoothly, it will take one year to clear the stocks. 500 workers of the corporation have been laid off, and waiting for the call to return.
Low sales and big stocks are also problems other manufacturers, including TMT and May 1 Automobile Corporation, are facing.
According to Vinaxuki, big domestic automobile manufacturers now have nearly 30,000 unsold trucks; Vinaxuki itself has 3,000.
“Vinaxuki has reduced sales prices by 3-6%, selling at below production cost, but sales have still been going very slowly,” said Bui Ngoc Huyen, General Director of Vinaxuki.
“We hope the government will give us support by delaying the collection of the VAT tax,” Huyen said, adding that the support proves to be very necessary to help manufacturers avoid shutting down.
The Ministry of Finance has confirmed it has received the proposal from domestic manufacturers. An official of the ministry said that since the government announced it would take measures to help businesses settle difficulties, the ministry has received a lot of proposals on tax exemptions and reductions.

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