Analysts have warned that the car ownership registration tax increases would not help increase the tax collection to the state budget. Especially, the tax collection may decrease due to the sales falls.

When the Hanoi people’s committee raised the car ownership registration tax to 20 percent and the car plate number fee to 20 million dong, and the HCM City authorities decided to raise the tax to 15 percent, they said that the decisions aim to increase the tax collection to the state budget and help ease the number of private cars in circulation.

However, after a period of implementing the decisions, analysts have warned that the goal of increase the tax collection to the state budget has been unattainable. 

The number of cars sold in January 2012 dropped dramatically in comparison with the same period of the last years. The 17 members of the Vietnam Automobile Manufacturers’ Association VAMA sold 4274 cars of different kinds, the three-year lowest level, which represented the 61 percent decrease in comparison with December 2011 and 60 percent over the same period of the last year.

Especially, the sales of the models which bear high luxury tax were very modest with only 2711 cars sold. Meanwhile, in December 2011, the manufacturers could sell 6950 cars.

Automobile manufacturers once forecast that the demand in 2012 would decrease by 20 percent from 2011. However, considering the sales in the first month of the year, some analysts have predicted that the sales would be even lower; especially the sales of less than 10 seat cars, due to the increasing tax and fee.

In 2011, VAMA’s enterprises paid two billion dollars to the state budget which include car part import tax, luxury tax, value added tax VAT and corporate income tax. If the forecast that the car sales decreases by 20 percent comes true, the tax collection to the state budget would decrease by 300 million dollars. Meanwhile, the increases in the revenues from the car ownership registration tax and number plate granting fee in Hanoi and HCM City would not be able to offset the decreases.

According to the Ministry of Public Security, about 30,000 cars are registered in Hanoi every year, while the figure is 20,000 in HCM City. If the car sales decreases by 20 percent as predicted, Hanoi would collect 57 million dollars more form the car ownership registration tax increase and 20 million dollars from the number plate granting, or 80 million dollars in total. Meanwhile, HCM City would collect 24 million dollars more, if noting that the average car price is 30,000 dollars.

This means that the total tax collection from cars in Hanoi and HCM City would be 100 million dollars, which is far below the tax collection decrease.

This may happen that the tax collection in Hanoi would increase, because big automobile manufacturers do not set up factories there. However, Vinh Phuc, Quang Nam and HCM City, where there are the production bases of big manufacturers, would suffer the tax collection decreases due to the anticipated output decreases. This means that the tax collection to the central state budget would decrease.

Meanwhile, some people have commented that it is an unpractical decision to raise the car ownership registration tax. If the tax gets higher, the demand would decrease and the number of cars in circulation would decrease, which would lead to the decreases that car owners have to pay.

Dao Lam, a senior official of the Hanoi Police, said on February 19, on An Ninh Thu do that the number of citizens coming to the police station to follow the procedures to get car number plates has been decreasing sharply. In the last two weeks, only 200 people have come, decreasing by tens of times in comparison with the previous months.

Source: VNN