New tax seen to dampen local vehicle sales in 2018

The country’s motor vehicle industry is likely to grow flat next year as the government is fast tracking the implementation of higher excise taxes on cars by January 1, 2018.

Already, the government sees passage of the package 1 of the Tax Reform for Acceleration and Inclusion (TRAIN) Bill soon so it can be published in a newspaper by Dec. 15 and becomes effective by January 1, 2018.

“It will be flat growth next year,” said Isuzu Philippines Corp. President Hajime Koso.

Koso noted that this year’s car sales are expected to grow 18 percent to 450,000 units.

Vehicle sales by the 22 members of the Chamber of Automotive Manufacturers of the Philippines Inc. and Truck Manufacturers Association grew by 16 percent as of October this year to 339,380 units from 292,502 units in the same period last year. Other sales would come from the all importers group Association of Vehicle Importers and Distributors (AVID).

The 11-member all traders’ group already sold 48,348 units in the first semester this year. The sales performance was 6 percent higher than the 45,470 units sold by AVID in the same period last year.

The higher excise tax will have a dampening impact on car sales as buyers will have to adjust computation based on the new prices.

For instance, Koso said the higher excise tax rate, which is based on the value of the vehicle could mean 8 percent increase in MU-X, IPC’s flagship vehIcle. MU-X costs R1.5 million.

Another dampening factor in car sales is the increase in fuel cost, he said.

The first package of the TRAIN Bill covers the reduction in personal income-tax rates, with offsetting measures that aim to expand the valueadded tax base, adjust the excise tax on petroleum products and index these to inflation, restructure the excise tax on automobiles, except for buses, trucks, cargo vans, jeepneys, jeep substitutes, single cab chassis and special-purpose vehicles, and increase taxes on sugarsweetened beverages.