Government bares new auto tax rates

The Department of Trade and Industry (DTI) released yesterday details of the newly-revised and Malacañang-approved Motor Vehicle Development Program (MVDP).

Under the approved program, all types of motor vehicles will now be subject to a graduated excise tax depending on their value.

There will no longer be any exemptions for the Asian Utility Vehicles (AUVs) or for 10-seater vehicles.

Exemptions will now apply for motorcycles, trucks and buses only.

Used vehicle importations will now be prohibited except for some trucks, buses and special purpose vehicles such as heavy equipment, fire trucks, ambulances and those covered under the balikbayan program.

The revised MVDP also states that there will be a restructuring of the Most Favored Nation (MFN) tariff rates and the Philippines will push for an extension of the ASEAN Industrial Cooperation (AICO) scheme.

Under the new value-based excise tax system, all types of vehicles valued up to P500,000 will be subject to a three percent excise tax.

Initially, government had been eyeing a benchmark of P600,000 for the three percent tax.

AUV makers had been lobbying for a higher value explaining that even the basic AUV model would easily hit the P600,000 price level.

Under the current excise tax system based on engine displacement, AUVs were exempted under the 10-seater ruling.

The government has realized that the current excise tax system is complicated and has many loopholes that has effectively eroded the government tax revenue base.

As a result, 70 percent of all vehicle sales are tax exempt. Under the new tax system, all types of vehicles priced above P500,000 up to P1 million will now be subject to a tax rate of 15 percent.

All types of vehicles priced above P1 million and up to P1.5 million will now be taxed at 25 percent.

All types of vehicles priced above P1.5 million up to P2 million will now be subject to a tax rate of 40 percent and all types of vehicles priced above P2 million will be subject to a tax rate of 100 percent.

The local automotive industry directly employs 37,000 people and generates $1 billion in foreign exchange earnings for the country.

A total of P68 billion has been invested in the industry, P40 billion in the auto assembly and another P28 billion in parts manufacturing.