DOF bats for 50% tax on luxury cars

The Department of Finance (DOF) is proposing to lower the excise tax on luxury cars from 100 percent to 50 percent.

The proposal was described by Rep. Herminio Teves, vice chairman of the House committee on ways and means, as "anti-poor and pro-rich."

Based on a 50-percent excise tax, the DOF is projecting a tax take of around P300 million, earning the further ire of Teves.

Teves said the proposal to slash the excise tax on luxury cars from 100 percent to 50 percent clearly shows the DOF’s "anti-poor and pro-rich" bias.

He pointed out that while the excise tax on luxury cars such as BMW, Mercedes Benz, Jaguar and Volvo would be slashed by half, government is slapping a 15-percent excise tax on the poor man’s car, the Asian Utility Vehicle (AUV).

Previously, AUVs were tax exempt.

Government had decided to revise the excise tax on motor vehicles in a bid to raise revenues to plug a runaway budget deficit.

As of end-November 2002, the budget deficit was already a little over P200 billion.

Teves complained that with a 50-percent excise tax on luxury vehicles, government would be able to raise a mere P300 million.

Teves, during a meeting with representatives of the DOF, expressed his displeasure over the slashed excise tax.

He dared the DOF to "prove to me that the revenue will increase," even as he expressed strong doubt about the government’s ability to collect the additional revenue.

The new excise tax would be based on value from the previous basis of engine displacement.

The tax rates would graduate from a low of three percent for vehicles priced up to P500,000 and up to a rate to 50 percent for those priced at over P2 million.

There have been fears expressed that a value-based excise tax would only result to price manipulation so that the car manufacturers would actually end up paying even less taxes.