Car tax hike pushed to ease traffic mess

The Department of Finance (DOF) wants higher excise taxes levied on the sale of motor vehicles, saying this was one way of easing the worsening traffic crisis in Metro Manila and other highly congested urban centers.

According to Finance Secretary Carlos Dominguez III, the proposed implementation of the automobile tax increase would, under the DOF’s timetable, begin in 2018.

This, in turn, will give the Duterte administration enough time to start fixing the problems plaguing the country’s rail transit system and put in place additional alternative modes of city travel that would encourage people to use mass transport rather than ride cars.

“If this thing is going to pass, it will probably be effective in 2018. So we have a year to fix it,” Dominguez said, adding that the additional taxes were not being imposed “merely to make life hard for people” but also to finance the government’s infrastructure needs.

More importantly, however, the new taxes would be imposed progressively, meaning duties for smaller and cheaper vehicles will be raised minimally while those on luxury vehicles will rise significantly.

Under the DOF’s proposal, buyers of small and relatively affordable automobiles like the Mitsubishi Mirage G4 would have to pay an additional P15,000 in excise taxes, while wealthier buyers of luxury sport utility vehicles (SUVs) like the Range Rover Sport SVR would see their bills rise by P838,000.

Under the DOF proposal, the tax for entry-level cars priced P600,000 and below would go up from 2 percent to 5 percent, while luxury vehicles priced over P2.1 million would be taxed 60 percent of the manufacture or import price, up from the current tax of P512,000 plus 60 percent in excess of P2.1 million.

Dominguez said this progressive tax on automobiles would discourage the purchase of new cars, which, would help stop traffic congestion from getting worse and reduce air pollution and the the country’s carbon footprint.

“What’s the point of buying a new car and not moving in the streets?” he said. “The point is we want to direct the people to go to public transport and we are making big investments in public transport, particularly the bus rapid transit system, and we’re fixing up the trains, whose maintenance has been neglected over the years.”

“We are going to make public transport more available,” he added. “We have to discourage new cars because just look at the traffic, It’s not moving.”

Dominguez said the worsening traffic congestion was not confined only to Metro Manila, but was also happening in other major urban hubs such as the cities of Davao and Cebu.

The DOF has submitted to Congress in September the first package under its proposed comprehensive tax reform program. This covers the reduction in personal income tax rates, along with offsetting measures that aim to expand the value-added tax (VAT) base, adjust the excise tax on petroleum products and index these to inflation, and restructure the excise tax on automobiles, except for buses, trucks, cargo vans, jeepneys, jeep substitutes, single cab chassis and special purpose vehicles.