Proposed excise tax won’t hurt car sales

CEBU, Philippines - The proposed higher excise tax on automobiles won't have a detrimental impact on car sales in the country, an official of car classifieds firm Carmudi Philippines said.

"We don't see any detriment effect (of proposed higher excise tax) to the business at all," said Managing Director Abhishek Mohan in an interview at the sidelines of Carmudi's financial literacy roadshow in Cebu City on Tuesday, as part of its CSR program.

Last December, House Bill 4774 or the Tax Reform for Acceleration and Inclusion (TRAIN) was filed in Congress, that aims to restructure the rates on excise tax imposed on vehicles, giving the worries that it may affect the automotive industry.

The bill came amid the government's push to make the Philippines a car manufacturing hub in Asia under the Comprehensive Automotive Resurgence Strategy (CARS) program started by the previous administration.

The CARS program, signed by President Aquino through Executive Order 182 on May 29, 2015, provides incentives to at least three car manufacturers to produce three car models locally with a production volume of at least 200,000 units for up to six years or an average of 33,333 vehicles a year.

Mohan said the government's plan to raise excise taxes could only likely affect the high-end market as the demand for cars continues to be healthy.

"We believe the proposed higher taxes will only affect the high-end cars," he said. 

"Motorization rate in the Philippines is still low. It has to grow. You know owning a car is an aspiration. People still buy cars," he also noted.

The proposed excise taxes on automobiles is contained in Article VI of both House Bill 4774 authored by Rep. Dakila Carlo Cua, committee chairman, and HB 4688 by committee vice chairman Rep. Joey S. Salceda Both bills are titled TRAIN.

Under Cua’s bill, the excise tax for automobiles shall be raised to 4 percent from the present 2 percent if the net manufacturer’s price/importer’s selling price is up to P600,000.

* If the price is P600,000 to P1.1 million, the tax rate shall be P24,000 plus 40 percent of value in excess of P1.1 million. The present tax rate is P12,000 plus 20 percent of value in excess of P1.1 million.

* If the price is over P1.1 million to P2.1 million, the tax rate shall be P224,000 plus 100 percent of value in excess of P1.1 million. The present tax rate is P112,000 plus 40 percent of value in excess of P1.1

* If the price is P2.1 million, the tax rate shall be P1.224 million plus 200% of value in excess of P2.1 million. The present rate is P512,000 plus 60 percent of value in excess of P2.1 million.

President Rodrigo Duterte earlier assured the auto industry that the proposed measure will be fair and supportive. He said the government will take due consideration of the industry's concerns on tax proposals and fiscal reforms.

Duterte had asked Congress to raise excise taxes on cars to help offset a reduction in income taxes which his administration is now strongly pushing.

The Department of Finance department had pegged the revenue losses from reducing the personal income tax at around P139.6 billion in the first full year of implementation and will be offset by expanding the VAT base by limiting exemptions on raw food and other necessities such as education and health care; raising excise tax rates of petroleum products; and restructuring the excise tax rates on automobiles.

The DOF said that the first package is estimated to yield P206.8 billion in its first year of implementation P162.5 billion from reforming the tax rates and P44.3 billion from legislated tax administration reform. (FREEMAN)