The Finance Department agreed to keep the excise tax rate on small cars low as a concession with the Trade Department which promotes the Comprehensive Automotive Resurgence Strategy, or Cars program.
Trade Secretary Ramon Lopez said Tuesday the Finance Department reviewed and subsequently included the proposal of the Board of Investments to limit the increase in excise tax on the small car segment to a minimum level.
“I made sure that we will be given fair concession for the small car segment. I’m not sure yet, but I think what was suggested in the DOF proposal was a hike of 2 to 3 percent,” Lopez told reporters at the sidelines of a trade seminar conducted by Japan External Trade Office in Makati City.
A bill in Congress proposes to double the excise tax on automobiles from the present 2 percent to 4 percent if the net manufacturer’s price/importer’s selling price is up to P600,000.
It also proposes a tax rate of P24,000 plus 40 percent of value in excess of P1.1 million, if the vehicle’s price is P600,00 to P1.1 million; P224,000 plus 100 percent of value in excess of P1.1 million for vehicles priced at more than P1.1 million to P2.1 million; and P1.224 million plus 200 percent of value in excess of P2.1 million for those valued at over P2.1 million.
Lopez, who is also the chairman of BoI, said the agency appreciated the Finance Department’s gesture, as a higher tax increase could have a major setback on the automotive industry’s development.
Included on the small car tax package are vehicles with a value of P1 million and below.
The automotive industry posted record annual sales over the past four years. Sales in 2016 reached 403,000 units, with expectations that sales would top 450,000 units in 2017.
“We explained to Congress and to the DoF that the planned higher tax collection will not be affected by lesser tax on small vehicles. Yes, it will be small adjustment, but at higher volume. So the peso value is also bigger,” Lopez said.
The automotive industry said earlier it was willing to abide by the government’s scheme to raise more revenues from tax collection but said it should be within an acceptable range to provide protection to the industry.
The industry and the Trade Department expressed concern that the tax increase would affect the viability of the Cars program”•an incentive scheme which expected to usher in a new age of motorization in the Philippines.
The Finance Department said it instead was looking at reducing the tax rate imposed on multi-utility vehicles and pick-up trucks because of their multi-function characteristics. It is also reviewing proposals that call for the retirement of old and aging vehicles.
The Finance Department said it would not oppose the growth of the automotive sector but there should be a way to optimize road efficiency and resolve the traffic problem by lessening the volume of vehicles on the road.