Toyota has proposed a series of tax breaks for locally assembled cars so that the Japanese automaker can increase the localization rate and open new factories in Viet Nam.

Local media cited a letter Toyota sent to Vietnamese authorities last week as saying that tax reductions are among many policy recommendations the carmaker put forward based on its production forecast.

These recommendations were submitted with a view to maintaining Toyota’s production in Viet Nam for the long-term development of the Vietnamese automobile industry after 2018.

A file photo shows a customer looking at an imported car at a dealership in Ho Chi Minh City.

The Japanese firm proposed changing the calculation of the excise tax on completely knocked down (CKD) cars from selling to factory prices, which Thailand and Indonesia are applying.

CKD cars are vehicles that are assembled locally with all of the major parts, components, and technology imported from the country of their origin.

Toyota also suggested reducing import duties on CKD car components imported from Japan from the current rate of 15-25% following World Trade Organization commitments to 0%, which is equal to the tax rate for those shipped from ASEAN starting in 2018.

Moreover, Toyota also wants a corporate income tax reduction for automobile manufacturing enterprises, which are currently mostly foreign-invested firms, including the Japanese carmaker.

The most noticeable suggestion is a request for government subsidies in the form of financial support for locally assembled vehicles equivalent to 50% of the price difference between imported cars, or completely built units (CBUs), and CKD cars.

According to calculations by Toyota, CKD cars will be around 20-25% more expensive than CBUs in 2018 when import tariffs for cars made within ASEAN are to be fully exempted.

Toyota recommended that government subsidies should be worth around 10-12.5% of the price difference between CKD cars and CBUs.

(Source: tuoitrenews)