Used car imports to be taxed P.5M

Malacañang has finally issued an Executive Order (EO) imposing a P500,000 specific tax on used car imports which would, hopefully and finally, stop the entry into the local market of second-hand used vehicles which pose both an environmental and safety hazard.

This was announced Tuesday night by Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) vice president Elizabeth Lee and Customs Commissioner Alberto Lina who both, however, could not give further details about the EO.

The Arroyo government had decided to impose the specific tax on used car imports as it has, so far, been unable to stop the importation of second hand vehicles through the free-ports which continue to question the legality of a government-imposed ban on such vehicle importations.

Imported second-hand vehicles are supposedly environmentally hazardous because in their country of origin they are normally at the end of their life span and their assemblers no longer produce replacement parts.

Such vehicles are exported as scrap and end up in the Philippines.

The P500,000 specific would be on top of the 30 percent most favored nation (MFN) rate, excise tax ranging from two percent to 60 percent depending on the price, and the 10 percent value-added tax imposed on the landed cost.

Most of the second-hand vehicles also being imported are right-hand drive vehicles which are then converted to left-hand drive.

Unfortunately, the conversion poses a safety hazard to both the driver and the public in general since the vehicles no longer comply with vehicle safety standards.

The provision banning the importation of used cars under Executive Order 156, or the Motor Vehicle Development Program (MVDP), is still covered by a court injunction.

The local auto industry has been complaining that used cars stunt the growth of the industry.

Local auto makers said more than half of the vehicles registered with the Land Transportation Office (LTO) last year were imported used cars.

In a related development, President Arroyo has asked the House leadership to certify as urgent the passage of the Anti-Smuggling Act of 2005.

In a letter to House Speaker Jose de Venecia, the President stressed that passage of the Anti-Smuggling Act of 2005 would address "the public emergency arising from the urgent need to curb the occurrence of smuggling in the country and help address the fiscal deficit by way of enhanced government collection of duties and taxes."

Based on a research paper of the Center for Research and Communications (CRC), it is estimated that government lost almost P140 billion due to smuggling in 2000 alone.