Gov't Resolves to Come to the Rescue of Auto Industry

Taipei, Nov. 20, 2008 (CENS)--The government has resolved to come to the rescue of the beleaguered local auto-making industry, via subsidizing the replacement of used cars with new cars and cutting commodity tax for autos.

The Ministry of Economic Affairs (MOEA) has in principle agreed to the relief package proposed by the Taiwan Transportation Vehicle Manufacturers Association (TTVMA), calling for the government to encourage auto purchase via subsidy and tax cut. The MOEA will discuss with the Council for Economic Planning and Development (CEPD) and the Ministry of Finance (MOF) for the package soon.

The package is designed to check the nosedived decline of auto sale, as the number of new auto licenses reached only 17,000 in October, a 20-year low for the month. The auto sale this year is estimated at 200,000-220,000 units, a far cry from the peak level of 510,000 in 2005, as well as 360,000 in 2006 and 320,000 in 2007.

The package calls for subsidizing the replacement of used cars with new ones, according to the usage years of the former, such as NT$50,000 of subsidy for used cars 10 years and older.

For cars with usage less than 10 years, the owners can sell their cars to auto dealers for export to Australia, Southeast Asia, or other overseas markets. The owners then can be entitled to deduction in commodity tax for purchasing new cars within one year, with the extent of deduction commensurate with the usage years of their used cars, such as 90% of deduction for cars with less then one year of usage and 80% for those with less than two years of usage. Presently, a 1,600 c.c. car is subject to 25% commodity tax, meaning that for such a car tagged at NT$500,000, the commodity tax reaches NT$125,000.

The MOF has suggested simplifying the subsidy by fixing it at NT$25,000, regardless of the usage years.

The TTVMA also proposed to change the existing two-tier commodity-tax bracket of 25% (for engine displacement under 2,000 c.c.) and 30% (for larger models) to the three-tier bracket of 15% (for less than 1,500 c.c.), 20% (1,500-2,500 c.c.) and 30% (over 2,500 c.c.). It also suggested removing the tax for electrical cars altogether and halve the existing 8% tariff for auto parts provisionally.