European chamber wants status quo on car taxes

The European Chamber of Commerce of the Philippines (ECCP) is worried over the looming increase in excise tax on automobiles, raising concern that this will push European car makers “to be even more disadvantaged” in the local market, a top official said.

ECCP president Guenter Taus said that European brands in the local car market were already priced at a disadvantage when compared to Asian counterparts, not only because the latter enjoyed a broader patronage, but because they were already boosted by existing trade arrangements with neighboring nations.

Even in status quo, Taus said that vehicles imported from the European Union already were charged various fees that total to 102 percent of the initial retail price. Asian companies, on the other hand, currently benefit from either bilateral or multilateral trade agreements that help bring prices down.

“[A higher] excise tax on automobiles will cause the European automobile manufacturers to be even more disadvantaged. Currently, EU vehicles incur 30-percent customs duty, 12-percent VAT and excise or ad valorem tax from 2 percent to 60 percent, which translates to 102 percent of the initial retail price,” he told the Inquirer in an e-mail.

“Meanwhile, most competing automotive companies in the market originate from jurisdictions with bilateral or multilateral trade agreements with the Philippines, such as Japan and South Korea, for instance, which provide for preferential tariffs on automotive vehicles,” he said.

While certain brands enjoy a significant reduction in their tariffs under deals like the Japan-Philippines Economic Partnership Agreement (JPEPA), European car makers are not afforded the same luxury, especially since the Philippines is still in talks with the European Union on a free-trade agreement.

Congress is moving to pass the first package of the comprehensive tax reform program, which includes a proposal to raise the excise tax currently imposed on cars. The Lower House has already passed its version of the first package, filed as House Bill 5636, while the Senate is currently deliberating on Senate Bill 1408.

Both chambers in Congress seek to raise the excise tax, with the Senate bill pushing to have even higher rates compared to that of the Lower House. The local automobile industry has presented a position paper against both bills, proposing an increase that is not as drastic as those presented in either bills.

In its position paper, the local car industry sought the expansion of the number of tax brackets indicated in the Tax Code of the Philippines from four to seven, suggesting tax rate increases that were lower than what the government recommended.