Thursday, July 31, 2008

Vietnam hikes car tax to reduce traffic congestion

HANOI, Vietnam: Vietnam will hike car registration fees to as much as 15 percent of an auto's purchase price to try to reduce traffic congestion in big cities and curb the country's soaring trade deficit, state media reported Wednesday.

The decision bumps up the fee for vehicles with less than 10 seats to 10 percent to 15 percent of the purchase price, depending on the area, the online newspaper VnExpress said. The current registration fee is 5 percent of a vehicle's sales price.

The newspaper quoted the decree, signed by Prime Minister Nguyen Tan Dung, as saying the move aims to further restrict new car registrations, thus reducing traffic congestion in big cities.

Auto sales have surged in Vietnam in recent years amid robust economic growth. Last year, a record of more than 100,000 vehicles were sold.

Auto dealers feared the new decision would hurt sales, which have been slowing recently due to increased fuel prices, soaring inflation and a slumping world economy.

"Vietnam's automobile industry is already faced with numerous difficulties because of the economic slowdown and the banks tightening on new loans," said Nguyen Hoai Anh, sales manager of a Toyota dealer in Hanoi.

Anh said new cars purchased in July at his dealership were down 50 percent to 60 percent, compared with two to three months ago. He said the new registration fees will further impinge on sales.

The Ministry of Finance is also considering raising import taxes for cars in a bid to cut a record trade deficit, which stood at US$15 billion in the first seven months. In April, the government raised the car import tax to 83 percent from 70 percent.

There are an estimated 1.2 million cars in the country of 86 million people.