The production and business of automobile enterprises is still facing difficulties. Illustrative photo: Internet

Reduction in registration fees has a positive impact on sales of the domestic auto industry

Evaluating the recent implementation of a 50% reduction in registration fee for domestically produced and assembled cars, the Ministry of Finance said that to support economic development, from 2020 to 2023, the Ministry of Finance developed and submitted to the Government and the National Assembly to promulgate many policies to reduce, defer, and postpone many taxes, fees, and land rents for people and businesses.

In particular, the reduction in registration fee rate alone is stipulated in 3 Decree (Decree No. 70/2020/ND-CP dated June 28, 2020, Decree No. 103/2021/ND-CP dated November 26, 2021 and Decree No. 41/2023/ND-CP dated June 28, 2023). Accordingly, the registration fee for domestically produced and assembled cars reduced up to 50%, every six months.

From January 1, 2024, the registration fees for domestically produced and assembled cars will be implemented according to Decree No. 10/2022/ND-CP dated January 15, 2022 of the Government, accordingly the registration fee for domestically produced and assembled cars is equal to the fee for cars of the same type.

The Ministry of Finance said, the implementation of this policy in recent times has achieved the goals set out and has a positive impact on consumers, manufacturers and distributors of domestically produced and assembled cars in particular and the economy in general.

Accordingly, in the last six months of 2020 when the policy of a 50% reduction in registration fee according to Decree No. 70/2020/ND-CP was applied, the number of domestically produced and assembled cars registered for the first time was 209,584, equal to 34,930 vehicles/month, an increase of 2.03 times compared to the first six months of this year.

In 2021, a 50% reduction in registration fees from December 2021 to the end of May 2022 according to Decree No. 103/2021/ND-CP helped the number of domestically produced and assembled cars registered for the first time increase to 232,192. Of which, the number of domestically produced and assembled cars registered for the first time in December 2021 and the first five months of 2022 were 63,742 and 168,450 respectively.

In 2022, the average number of domestically produced and assembled cars registered for the first time in the first five months was 33,690 per month, 1.51 times higher than the average number in the last seven months of the year.

In the last six months of 2023, a 50% reduction in registration fee according to Decree No. 41/2023/ND-CP, the number of domestically produced and assembled cars registered for the first time was 176,483, equal to 29,413 per month, 1.6 times higher than those in the first six months of 2023.

However, the Ministry of Finance also assessed that, in addition to the achievements for the domestic automobile industry, the reduction of registration fees also has negative impacts on the state budget and in terms of international commitments.

Revenue reduces about VND867 billion per month since the policy of registration fee reduction

According to the Ministry of Finance, sales of the entire auto market in the first three months of 2024 (including passenger cars and commercial vehicles) decreased significantly.

The Vietnam Automobile Manufacturers Association (VAMA) reported that sales of VAMA businesses reached 58,165 vehicles, down 17% compared to the same period in 2023.

The Ministry of Finance believes that to stimulate consumption, providing financial support to people and businesses, creating momentum to restore growth for the domestic automobile manufacturing and assembly industry amid many difficulties and challenges, the continued reduction of registration fee for domestically produced and assembled cars is a necessary solution.

According to the Government's direction, the Ministry of Finance submits to the Government to continue 50% reduction in registration fee from the effective date of this Decree until January 31, 2025. From February 1, 2025 onwards, registration fee rate will continue to comply with the provisions of Decree No. 10/2022/ND-CP of the Government.

According to the Ministry of Finance, in 2020 and 2022, state budget revenue from registration fees reduced about VND5,238 billion, and the revenue from special consumption tax, VAT increased about VND5,200 billion.

In the current period, if the policy on a 50% reduction in registration fees for domestically produced and assembled cars is extended, the increase in revenue from special consumption tax and VAT may not be enough to compensate for the decrease in revenue from registration fee. It is expected that a 50% reduction in registration fee for domestically produced and assembled cars could reduce about 867 billion VND/month in revenue, equivalent to the reduction according to Decree No. 41/2023/ ND-CP.

The Ministry of Finance also said that according to the provisions of the State Budget Law, revenue from registration fee belongs to the local budget. A 50% reduction in registration fee for domestically produced and assembled cars may impact the local budget balance.

Also according to the Ministry of Finance, a 50% reduction in registration fees for domestically produced and assembled cars will likely increase the number of cars sold and registered, so revenues from registration fee, special consumption tax, and VAT could increase.

However, the actual revenue from special consumption tax and VAT is concentrated only in 8 localities where there are domestic automobile manufacturing and assembling companies, while other localities see the reduced revenue due to this policy. Therefore, the localities have requested the central budget to compensate for this revenue shortfall to ensure local budget balance.