Vietnam's Ministry of Finance has proposed the government give an extension on the deadline for payment of a special consumption tax worth a total 20 trillion dong ($871 million) on domestically produced and assembled cars.

Accordingly, payable amounts for June, July, August and September would be extended to November 20.

The ministry said that the extension was aimed at urgent support for the domestic car industry to overcome difficulties after the pandemic.

The special consumption tax that domestic automobile manufacturers paid to the state budget averages around 2.45-2.8 trillion dong per month.

The ministry estimated that the budget collection would be reduced by around two-to-three trillion per year in special consumption tax when electric vehicles (EV) were more popular and gradually replaced petrol-fuel cars.

The ministry said that the tax payment extension policy was necessary to help domestic manufacturers overcome difficulties, adding that not only Vietnam but also other countries raised policies to support domestic industries in the pandemic and post-pandemic period.

The support was only short term, thus, the risk of facing anti-subsidy lawsuits would not be high because the investigation initiation only aimed at terminating existing policies, not at policies which already ended, the ministry said.

If approved, the domestic automobile manufacturers and assemblers would be given excise tax preferential policies for the third consecutive year.

The excise tax on cars and components was imposed on cylinder capacity, with the lowest at 35 per cent and the highest at 150 per cent.

The high tax rates left car prices in Vietnam around 10-25 per cent higher than in other countries in the region.

Earlier, the Ministry of Industry and Trade proposed an exemption of special consumption tax on automobile components for domestically-produced cars, which would help lower costs, and selling prices and increase competitiveness in the market.

Amendments to the Law on Special Consumption Tax are being studied.