Lower excise tax hike eyed on cars priced P1M and below

The Department of Trade and Industry (DTI) and the Department of Finance (DOF) have agreed to lower the proposed excise tax increase on cars priced below P1 million.

Trade and Industry Secretary Ramon M. Lopez told reporters Tuesday that they would like to protect the output of the government’s Comprehensive Automobile Resurgence Strategy (CARS) program, which is to heavily boost local production of three car models in six years.

“For me, what’s important is the bracket for those valued below P1 million because that’s where our CARS program is,” he said in Filipino on the sidelines of a business forum.

“I wanted to assure [consumers] that the small cars would be given a concession. There would still be a tax but it would be lower. I think it’s 2 to 3 percent. It’s the smallest adjustment for those small cars priced P1 million below. We are aligned with the DOF and they listened to our proposal that we should have lower rates for small cars.”

Lopez said the changes have yet to be included in House Bill (HB) 4774, or the Tax Reform for Acceleration and Inclusion. Filed by Quirino Rep. Dakila Carlo E. Cua and backed by the DOF, the bill included a proposal to increase the excise tax slapped on automobiles.

Compared to the DOF’s earlier version of the proposal, the bill would now want to impose a lower rate for cars under the first bracket, which are valued below P600,000. However, it slapped higher rates and fees for those priced above that level. In particular, the earlier version of the proposal imposed a 5-percent excise tax on automobiles under the first bracket. The bill filed in Congress, on the other hand, lowered that to 4 percent.

In the second bracket, HB 4774 would impose an additional P24,000 along with 40-percent of the value between P600,000 and P1.1 million, while the original proposal only imposed a rate of 20 percent. The succeeding brackets had similar increases as well.

The CARS program is a P27-billion government initiative that aims grant incentives to three carmakers to locally produce three car models.