The progressive automobile tax plan under the comprehensive tax reform program will not affect the growth of the industry, a high-ranking official of the Finance Department said Monday.
Finance Undersecretary Karl Kendrick Chua said in a statement the domestic automobile industry would continue to thrive and sustain its growth momentum amid the Duterte administration’s plan to make the excise tax system more progressive.
The measure aims to replace the current four-bracket system with a five-tier structure that will impose higher rates on the pricier luxury-car segment.
Chua said that in other ASEAN economies such a Indonesia and Malaysia, automobile excise tax rates reached 125 percent and 105 percent, respectively, yet their luxury car markets continued to thrive.
Reforming the excise tax system for automobiles is among the provisions of House Bill No. 5636 or the proposed Tax Reform for Acceleration and Inclusion Act now pending before the Senate.
This measure, which is the first package of the Duterte administration’s Comprehensive Tax Reform Program, also aims to lower income taxes and to make up for the consequent revenue loss by plugging tax leakages, limiting value added tax exemptions and adjusting excise taxes on fuel, among other measures.
HB 5636, or the Train measure, was approved with 246-9 vote with one abstention on May 31 by the House of Representatives before Congress adjourned sine die.
Trains is a consolidation of the original tax reform bill”•HB 4774″•filed by Quirino Rep. Dakila Carlo Cua and 54 other tax-related measures.
Chua said in Malaysia, luxury car sales grew 3.9 percent in 2016, while in Indonesia, luxury car manufacturer BMW recently expanded its model list and local car assembly, both for the domestic Indonesian and export markets, because of high demand despite the high tax rates.
The same is true in the Philippines, where Satoru Suzuki, president of Toyota Motor Philippines, said the company was not revising its production output for 2017 even if it anticipated an initial drop in vehicle sales because of the looming car price increases under the tax reform package.
Chua said Train aimed to make the tax system more efficient, simpler and fairer by transforming it into a more progressive one where the rich, rather than the poor, would bear the tax burden.
Chua said that under the Train bill, mass-market vehicles in the first bracket, such as the base model Toyota Vios, would only increase by around P13,000.
“This means that even at 50-percent interest, which is a very high assumption even at the worst financing terms, the proposed tax rate for mass-market cars will only add at about P350 in amortization when spread over 60 months, which is the standard loan duration for cars. The additional take-home pay resulting from the proposed hefty personal income tax cuts can more than offset this,” Chua said.
Chua said pick-ups, buses, trucks, cargo vans, jeepney/jeepney substitutes and special purpose vehicles such as cement mixers, fire trucks, boom trucks, ambulances and off-road vehicles for heavy industries were excluded from the proposed auto excise tax adjustments.
Variants used as commuter vehicles or utility vehicle express units such as Mitsubishi Adventure, Isuzu Crosswind, Toyota Hi-Ace and Nissan Urvan that each cost between P800,000 and P1.3 million won’t be significantly affected by the adjustments, Chua said.