The Ministry of Finance is tasked with reviewing current tax rates for automobile production and assembly for further extending incentives in this regard, said Deputy Prime Minister Le Van Thanh.

Car manufacturers are in need of more support from the government. File photo

Thanh made the statement in response to the recent suggestion by the northern province of Hai Duong to address concerns of automakers in a difficult economic environment, in which tax incentives are seen as a key measure.

According to the Hai Duong Province Party Committee, the automobile industry has been a spearhead industry contributing a significant part to GDP growth in countries around the world.

“In Vietnam, the industry makes up 3% of total GDP growth,” stated the provincial Party Committee.

At present, tax incentives for imported auto parts are one of the most important preferential treatments for car manufacturers in Vietnam. This is of particular significance to enhance competitiveness for local cars manufacturers/assemblers given the country’s commitment to free trade agreements to opening up the market for completely-built cars imported from abroad.

For the automobile industry to have time to adjust to new policies, the government should make the decision at least one year in advance of the effective date, stated the Hai Duong Party Committee.

“Issuing policies that have an immediate effect would cause difficulties for firms in drafting their business strategies,” it added.

As domestically produced auto parts are facing fierce competition from imported products in ASEAN, which are enjoying zero import tariff under the effect of the ASEAN Trade in Goods Agreement (ATIGA) since 2018, the government has been providing tax incentives for cars produced locally from November 16, 2017, to late 2022.