Lopez: House version of auto excise tax better

Car manufacturing under the government’s automotive resurgence program would take a hit from higher excise tax rates passed in the Senate, possibly affecting the creation of jobs in the process, Trade and Industry Secretary Ramon Lopez said.

Lopez said he preferred the auto excise tax rates proposed in the House version of the first tax reform package under the Duterte administration. Compared to the Senate’s version, this gave smaller rate increases for units registered under the CARS program.

The Comprehensive Automotive Resurgence Strategy (CARS) provides perks to participating car companies to produce 200,000 units within six years. It has two registered participants, market leaders Toyota Motor Philippines Corp. (TMP) and Mitsubishi Motors Philippines Corp. (MMPC).

Under House Bill 5636, the tax rate depends on the car’s price bracket. For example, cars with a net manufacturing price of up to P600,000 would get a three percent excise tax rate in the law’s first year of implementation, and then four percent the following year.

Senate Bill 1592 simplifies the system, offering only two rates: 10 percent for those priced up to P1 million, and 20 percent for those that exceed that amount.

Lopez said the car firms might reconsider the number of units they would be manufacturing.

“In the end, it’s the manufacturing activity you are creating. If they are successful, that means the manufacturing activity would grow, creating more jobs and more local content. If the increase is super big, [there] would be a slowdown. That’s why our wish is closer to the House version,” he said.

Both TMP and MMPC joined the program during the last stretch of the Aquino administration, or prior to talks of increasing excise taxes. Representatives of both car companies did not provide the prices for their CARS-registered models.