New excise tax rates for autos backed

The Bureau of Customs is backing up the Department of Finance’s proposal to restructure the excise tax system for brand new vehicles under its first tax reform package.

In a statement, the BOC said it was fully supporting House Bill No. 4774, which contained the DOF’s proposal to lower personal income taxes, broaden the value-added tax base by cutting down on exemptions, increase excise taxes on petroleum and automobiles, as well as reduce estate and donors’ tax rates.

The BOC noted that HB 4774 was proposing to raise the excise tax rate on vehicles priced P600,000 and below to 4 percent from 2 percent previously.

The bill was also proposing the following excise taxes: P24,000 plus 40 percent of value in excess of P600,000 for vehicles worth more than P600,000 but not more than P1.1 million; P224,000 plus 100 percent of value in excess of P1.1 million for units priced more than P1.1 million but not more than P2.1 million, and P1.224 million plus 200 percent of value in excess of P2.1 million for luxury vehicles worth more than P2.1 million.

“Exceptions to the excise tax still include buses, trucks, cargo vans, jeepneys, vehicles with single cab chassis, and special purpose vehicles, as the DOF had originally proposed,” the BOC noted.

Customs Commissioner Nicanor E. Faeldon said he was “solid in supporting the DOF in this proposal.”

“The DOF said it does not expect car sales to decline as a result of the additional excise because take home pay of car buyers will increase significantly with the lowering of personal income tax,” the BOC noted.

Last week, Finance Secretary Carlos G. Dominguez III said that “the local automotive industry will continue its healthy growth rate even with the proposed adjustments in car excise taxes, given that the manageable price hikes in mass market vehicles would be readily absorbed by buyers who will, in effect, increase their take home pay by way of substantially lower personal income taxes.”

“Buyers would also hardly feel the effects of the price adjustments for mass market cars such as the Toyota Vios and the Mitsubishi Mirage from the proposed excise tax increase because of the flexible financing schemes offered by car dealers that stretches to as long as seven years for some models, which will become even more affordable amid the country’s low interest rate regime,” Dominguez added.

“While there may be an initial slowdown in car sales, the industry would be able to quickly recover and continue its robust pace of growth as it did in the past two years, when car sales went up by 25 percent,” according to Dominguez.

Initially, the BOC’s legal service expressed concern that raising excise taxes slapped on vehicles may result into “lower investments in the auto industry and job squeeze which run counter to the intent of the government to revitalize and further advance the growth of the industry.”

“But the BOC’s legal service committed to continue studying the impact of the proposal, and once done, to convey its findings to the Office of the Commissioner and the DOF,” the country second-biggest tax-collection agency said.