DTI backs House version of automobile excise tax

THE Department of Trade and Industry (DTI) is lobbying for the bicameral conference committee reconciling the tax reform legislation to pass the House of Representatives’ version of the car excise tax, which calls for a longer transition period and has more brackets compared to the version proposed by the Senate.

Trade Secretary Ramon M. Lopez told reporters that the DTI’s preference for the House version was due to the smaller increase in excise tax for cars under P1 million, the category promoted by the Comprehensive Automotive Resurgence Strategy (CARS) program, which seeks to encourage greater domestic manufacturing activity in the sector.

“It might impact a bit of course the volume that [these car companies] should be selling. For our part, TRAIN (Tax Reform for Acceleration and Inclusion) is okay, the House version, we’re okay with it,” he added.

The excise tax on cars forms part of the first package of the comprehensive tax reform program. If passed this year, the car excise tax will be in force by January.

The House version of the tax has five brackets as opposed to the Senate’s two brackets, and also calls for a two-year implementation period to ease the impact of the increase in excise taxes.

On Wednesday, DTI released a position paper on the effects of the car excise tax on the models produced under the CARS program.

“It is also important to note that the narrowing of the gaps in prices owing to the reduced number of tax tiers might negatively affect the demand for the CARS participating models. This has not yet been included in the present analysis due to absence of sufficient data,” the paper read.

In the Senate version, the proposed increase in the excise tax will raise the price of the Mitsubishi Mirage — one of the models enrolled in the CARS program — by 7.64% to 7.8%, while the House version’s impact is 1.92% to 2.08%.

The Toyota Vios 1.3-liter model — the second participant in the CARS program — would see about 7.2% price increase on average under the Senate version of the tax while the House version bumps up the price by an average of 2.5%.

Mr. Lopez said that while the department favors the House version, what matters is the manufacturing activity generated from the automotive industry.

“In the end, it’s the manufacturing activity that you’re creating. When they are successful, it means that the manufacturing activity will grow, creating more jobs, creating more local content,” he added. —