Wheels of Jus­tice

New ex­cise tax and its ef­fec­tive date

Top Gear (Philippines) - - Car Culture -

‘Par­ties must make sure that both freely con­sent and un­der­stand terms of sale’

De­liv­ery is de­layed for my brand-new car to af­ter the im­ple­men­ta­tion of the re­vised ex­cise tax. Will I be af­fected by a price change?

No, the buyer should not be li­able for any in­crease in the pur­chase price brought about by the ex­cise tax on cars tak­ing ef­fect be­fore the car deal­er­ship de­liv­ers the unit. If the deal­er­ship fails to de­liver the unit within the agreed pe­riod of time, it will be in breach of its obli­ga­tions un­der the sales or­der or con­tract and will be li­able for dam­ages to the buyer. This an­swer as­sumes that, un­der a con­firmed sales or­der or con­tract, the buyer paid a down pay­ment and that the car deal­er­ship has promised to de­liver for an agreed pur­chase price and within an agreed pe­riod of time.

Read the fine print; the terms and con­di­tions of sale may vary among car brands and among car deal­er­ships for the same brand. While there may be an agreed pe­riod for the deal­er­ship to de­liver the unit, it might have the right to ex­tend the pe­riod of de­liv­ery or the right to uni­lat­er­ally can­cel or ter­mi­nate sales con­tract.

I am sure you’ve heard the car sales­man warn the buyer: “It is bet­ter to buy a car now while it’s still cheaper, as the pro­posed ex­cise tax will raise car prices ef­fec­tive Jan­uary 1st, 2018.” The buyer must ex­pect the sales­man to em­ploy scare tac­tics and sales talk to close the deal be­fore the ex­cise tax takes ef­fect; af­ter all, he fears that his sales vol­ume will be much less upon im­ple­men­ta­tion.

And to avoid the price in­crease, you take the plunge. You or­der your car and make the down pay­ment. You’re just anx­iously wait­ing for the deal­er­ship to de­liver your brand-new unit.

Ideally, the buyer and the sales­man should dis­cuss all the terms and con­di­tions of the sales or­der or con­tract. The par­ties must make sure that they both freely con­sent and un­der­stand the terms of sale, par­tic­u­larly the ef­fect of car deal­er­ship’s fail­ure to de­liver the car be­fore the im­ple­men­ta­tion of the new ex­cise tax.

Ac­cord­ing to var­i­ous news reports, Congress re­cently passed the ad­min­is­tra­tion’s tax re­form pack­age con­tained in House Bill No. 5636, or the Tax Re­form for Ac­cel­er­a­tion and In­clu­sion (TRAIN) bill, af­ter Pres­i­dent Duterte cer­ti­fied the bill as an ur­gent piece of leg­is­la­tion. This tax re­form aims to help fund the Duterte ad­min­is­tra­tion’s 10-point so­cioe­co­nomic agenda for in­clu­sive growth. The in­creased ex­cise taxes on ve­hi­cles seeks to gen­er­ate ad­di­tional rev­enue to fi­nance the coun­try’s in­fra­struc­ture needs and to solve the traf­fic cri­sis in Metro Manila.

Un­der House Bill No. 5636, the ex­cise tax on ve­hi­cles will in­crease ac­cord­ing to a tax rate or sched­ule based on the net man­u­fac­turer’s price or the im­porter’s sell­ing price, to be im­ple­mented in two phases: the first ef­fec­tive on Jan­uary 1st, 2018, and the sec­ond ef­fec­tive on Jan­uary 1st, 2019. As the Se­nate is still sched­uled to de­lib­er­ate on the House Bill in the com­ing months, the true ef­fec­tive date is still to be set.

We can safely as­sume that the ex­ist­ing rules and reg­u­la­tions (BIR Rev­enue Reg­u­la­tions No.

25-2003 and No. 60-2003) gov­ern­ing the im­po­si­tion of ex­cise taxes on ve­hi­cles will es­sen­tially be the same, or sim­i­lar to the rules and reg­u­la­tions to gov­ern the im­po­si­tion of ex­cise taxes on ve­hi­cles un­der the new law. These pro­vide a strict pro­ce­dure of in­ven­tory, con­trol, ap­proval, and col­lec­tion of ex­cise-tax pay­ments from the man­u­fac­turer, the as­sem­bler, or the im­porter be­fore the re­moval of the car from its place of pro­duc­tion or as­sem­bly, or from the cus­tody of the Bu­reau of Cus­toms.

In sim­ple terms, the li­a­bil­ity for ex­cise taxes is de­ter­mined by the re­moval of the car from its place of pro­duc­tion or as­sem­bly, or from the cus­tody of the Bu­reau of Cus­toms. It is not trig­gered by the date of de­liv­ery to the deal­er­ship or to the buyer. It is pos­si­ble that the ex­cise taxes were paid, and that the de­lay was sim­ply in the de­liv­ery to the deal­er­ship and/or the buyer.

The tax­a­tion of im­ported CBU ve­hi­cles that ar­rive at the Bu­reau of Cus­toms be­fore the im­ple­men­ta­tion of the new ex­cise tax law will be gov­erned by the ex­ist­ing tax law pre­vail­ing at the time of their im­por­ta­tion into the Philip­pines, pro­vided the cor­re­spond­ing Im­port En­try Dec­la­ra­tion has been filed, and the ap­pro­pri­ate taxes and cus­toms du­ties have been paid to the Bu­reau of Cus­toms. The reg­u­la­tions are so strict that even the value of the air-con­di­tioner, the ra­dio, or the wheels—in­clud­ing the cost of in­stal­la­tion thereof, whether or not the same were ac­tu­ally in­stalled in the au­to­mo­bile—forms part of the net sell­ing price.

Ac­cord­ingly, the deal­er­ship and its sales­man should be able to rea­son­ably pre­dict the de­liv­ery date of the car to the buyer. Af­ter all, the chain of events lead­ing up to the ef­fec­tive date for ex­cise taxes and up to the de­liv­ery to the buyer can be eas­ily iden­ti­fied in ad­vance.

Upon the ef­fec­tive date of the new ex­cise taxes, the man­u­fac­turer/as­sem­bler or im­porter can­not sim­ply change the de­clared sell­ing price of any car, with­out fil­ing a sworn state­ment with the Bu­reau of In­ter­nal Rev­enue be­fore the said car is re­moved from its place of pro­duc­tion or as­sem­bly or be­fore its re­moval from the Bu­reau of Cus­toms cus­tody. Any dis­count at the deal­er­ship will not af­fect the amount due for ex­cise taxes be­cause the ex­cise tax would have al­ready been paid.

In the end, the man­u­fac­turer or im­porter will inevitably pass the ex­pense for ex­cise taxes to the deal­er­ship. In turn, the deal­er­ship will pass the ad­di­tional ex­pense for ex­cise tax to the buyer.


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