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Automakers feel consumption tax heat

Update: September, 12/2005 - 00:00

Business Beat

(12-09-2005)

Automakers feel consumption tax heat

The Ministry of Finance has just announced its draft amendments to the laws on the special consumption tax and value added tax, and one of the provisions has sent a shock wave through the local automobile industry. The ministry proposed that special consumption taxes for local and imported automobiles be the same: 50 per cent for 3-5 seaters, 30 per cent for 6-15 seaters and 15 per cent for 16-24 seaters. At the same time, import taxes for foreign-made cars would be lowered from 100 per cent to 50 per cent. This proposal, according to the ministry, was in line with Viet Nam’s commitment to international integration.

Of course, local car manufacturers were the first to voice their protest. They said the tax changes would make it hard for them to compete with imported cars and would put on hold any expansion plans. They proposed that the new tax rates be applied gradually, but not before 2008, and that special consumption tax rates be lower, at 40 per cent, 25 per cent and 10 per cent, respectively, for locally assembled cars.

However, consumers were unhappy with the rising prices of "made-in-Viet Nam" cars over the last two years. Compared to prices elsewhere, Vietnamese cars cost much more, but there is no guarantee for quality. Some said that the cars sold here had a lot of options pre-installed as standard, and some buyers accepted that because the higher the car price, the easier they could re-sell it, even with some profit. Higher tax rates, officials said, could force manufacturers to source local parts and help reduce prices. Manufacturers complained the small market does not offer them economy of scale to source local parts and the catch-22 situation persisted. It remains to be seen if the proposed new tax system can help bring down car prices in Viet Nam.

VTV concerned about competition

Viet Nam Television (VTV) has for the first time expressed concerns about the upcoming competition from increasingly popular cable television. For a limited base of subscribers, mostly hotels and foreigners, cable television is now readily available from many service providers throughout the country. Some charge monthly fees, and some are free (they make profits from selling set-top boxes), but all provide more channels than domestic television stations. Last week, HBO and Cinemax said they had selected their distributor here in Viet Nam. This means several cable television services will carry HBO and Cinemax films with subtitles. Another sign of change is that local newspapers have started to review HBO films alongside local films on local channels.

The price war among service providers should also increase cable’s penetration rate. Not only are monthly fees getting lower, providers are looking to add services like video on demand, broadband internet connections, and online games.

VTV is worried that it will lose viewers if it does not invest in quality programs and provide what local viewers want and foreign channels cannot satisfy. This will be an enormous task and a shift in strategy as VTV tries to maintain its position and attract advertisers. Most local stations are buying rights to game shows, localising them and hoping to attract both viewers and advertisers. Some have been successful but others are a poor imitation of the real thing. The situation has also forced local stations to cooperate with local producers, private film studios and even private show producers to diversify their programming. Competition, after all, is a good breeding ground for talent and creativity.

Single land use certificate

The Government has finally concluded that land and housing certification should require only one certificate. This conclusion could end the debate among ministries that wanted different kinds of certification for land and fixed properties on land.

It is necessary to sum up the complicated certification system here. Red certificates were issued to those who had obtained the right to use a piece of land, usually non-residential land in rural areas. Pink certificates used to be given as proof of property ownership of land for which the holders had also obtained the use rights. When the Land Law was amended last year, pink certificates were finished, and red certificates are now used for all kinds of land, including residential land in urban areas. The problem remains that the red certificate only deals with the land use rights and not the properties. Only after the real estate market came to a sudden halt did the Government allow the issuance of a new kind of pink certificate as proof of house ownership.

However, one month has gone by and the new pink certificate is unpopular. HCM City authorities said they did not want the new certificate to further complicate the situation and have formally petitioned the Government to design a single certificate for land use and house ownership.

Now, the job of untangling the mess falls on the National Assembly, because certain law provisions have to be amended so the red certificate is used not only for land use rights certification but also for fixed property ownership. Before delegates can vote for such changes, ministries must sit down and smooth out any differences and come up with a consensus that will become the Government’s proposal to the National Assembly.

Traffic jams in HCM City

Brace yourself for more traffic jams in HCM City in the coming days, as more major infrastructure works kick off. The Nhieu Loc-Thi Nghe project along Nhieu Loc Canal will cause 10 locations to be closed to cars this month. The widening of Nguyen Van Troi-Nam Ky Khoi Nghia streets from Tan Son Nhat Airport to the city centre will worsen the traffic flow with the construction of Cong Ly Bridge and a series of underground sewage systems. The Thu Thiem Tunnel project and Dong-Tay Highway project will see the Khanh Hoi and Calmette bridges linking District 1 and District 4 closed for re-construction. This will affect traffic from the city centre to Sai Gon South area. All these public works will disrupt the traffic flow and traffic jams will be inevitable, at least for a short time.

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