The local automotive industry asked the government to consider its proposal for a seven-tier tax system that will serve as a median between the current structure and the government initiative as contained in the tax reform program.
The Chamber of Automotive Manufacturers of the Philippines Inc. and the Association of Vehicle Importers and Distributors, raised serious concerns on the short- to long-term risks the automotive sector would face if the proposed legislation is approved
“The proposed increase in excise tax on automobiles is too heavy. The motor vehicle industry will not be able to bear the resulting burden without having to pass on to consumers and therefore suffer from significant market loss,” the groups said in a position paper submitted to the Senate and House committees on ways and means.
The position paper attempted to show the benefits of the proposal to the government and the automotive industry.
The paper offered to increase the tier system from four to seven to include the segmentation of vehicular units.
The proposal also seeks to reduce the excise tax rates and ceiling on each bracket and provide stakeholders a lead time of at least six months from the date of the enactment to adjust to the new scheme.
Taxes for tier 1 vehicles or those with value of up to P600,000, based on the industry proposal of a 3 percent excise tax, which is 1 percent lower than the government’s 4 percent, will be increased to P18,000 from the current P12,000. This is also lower by P6,000 from the proposed P24,000 tax rate of the government proposal.
Those on Tier 2 or vehicles worth P600,000 to P1.1 million will be imposed a maximum of P168,000 tax, a median between the current maximum tax of P112,000 and the proposed P224,000 by the government.
For vehicles with value of over P1.1 million to P1.6 million or Tier 3 vehicles, the industry suggested a maximum tax of P368,000, while Tier 4 or vehicles worth P1.6 to P2.1 million would be slapped a maximum tax of P618,000, which is reasonable enough from the government’s proposed P1.22 million and higher than the current P512,000.
Vehicles of over P2.1 million to P2.6 million or Tier 5 can be subjected to a maximum of P1.018 million, while those over P2.6 million to P3.1 million or Tier 6 vehicles can be taxed by a maximum of P1.418 million.
The government proposal for Tier 5 and 6 carries a maximum excise tax of P2.24 million compared with the current excise tax of a maximum of P812,000.
Tier 7 vehicles, or those with value of P3.1 million and above, will be imposed a maximum tax of P1.14 million compared with the government’s P2.24 million and the current P812,000 maximum excise tax.