Grant tax incentives to domestic cars, control imported ones
The MoIT, under a written document sent to Ministry of Finance (MoF) recently has proposed some favorable tax policies for domestic manufactures as well as developing supporting industries, which contributes to reduce trade deficit in automobile area. 

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In the document, MoIT suggested to add some proposals made by Hyundai Thanh Cong Vietnam Auto JSC to its Draft Law amending and supplementing five tax laws, including the laws on Value Added Tax, Corporate Income Tax, Special Consumption Tax, Personal Income Tax, and Natural Resources.
Specifically, MoIT and Hyundai Thanh Cong would exempt domestic products from special consumption tax (SCT), contributing to easing the price of "made in Vietnam" cars. At the same time, MoIT suggested to abolish the import tax on raw materials parts from manufacturers investing in Vietnam in line with their commitments on long-term investment, products volume, technology transfer, and use of local labor force. The ministry also recommended an eight-month payment guarantee to be applicable instead of the current 30-day one.
Decree 116: Only a "short-term solution"
Previously, a similar proposal by MoIT to provide SCT exemption to domestically produced value has been criticized by MoF that it was not in line with the rules of the World Trade Organization (WTO).
Nonetheless, according to Le Ngoc Duc, General Director of Hyundai Thanh Cong Vietnam Auto JSC, this measure was taken in numerous regional nations such as Malaysia, Indonesia, and India.
"At present, the localization rate of Vietnamese car products, excluding trucks of less than 7 tons and passenger cars of 25 seats or more, is quite low. Given that, it is very difficult for locally assembled products to be exported to neighboring markets," Duc said.
Regarding the import tax exemption for raw materials manufacturers investing in Vietnam, Duc believed the idea would encourage car manufacturers to actively invest in the country and export in the near future.
Earlier, MoIT has issued a number of important policies to encourage the domestic automobile industry, including Decree No.116, which adds more conditions for car production, assembly, and import.
In a related move, some Japanese car manufactures have ceased importing cars to Vietnam after the Decree takes effect in January 2018, according to Nikkei.
Duc said that the Decree is just a short term solution to facilitate domestic car production. In the long run, when Vietnamese importers get better co-ordination with foreign car manufacturers, the trend of importing completely-built-up (CBU) cars to Vietnam will bounce back. “Given Vietnamese consumers’ strong taste for foreign products, this will be a great challenge for domestic manufacturers," Duc expressed his concerns.
Meanwhile, MoIT also repeatedly warned if the above incentives are not approved, domestic automobile products will suffer a disadvantaged against foreign peers.