Gov’t confers with auto firms on impact of planned excise tax

THE Department of Trade and Industry is consulting with the auto industry in order to gauge the potential effects of a hike in automobile excise tax, an official said.

This was confirmed by an official in the Board of Investments (BoI) — the investment arm of the Trade department.

BoI Executive Director for Industry Development Services Ma. Corazon Halili- Dichosa told reporters yesterday that they are studying how new excise taxes might affect the government’s Comprehensive Automotive Resurgence Strategy (CARS) Program.

“Of course we have to look into the industry because they understand themselves more. So let us see how it will affect them, the demand, considering also that there is this CARS program that we’re trying to achieve. It’s really a study that hasn’t been concluded yet,” she said in the sidelines of a project launch in Manila.

She said that the Trade department will gather the points of each stakeholder before arriving at a position on the matter.

The CARS program, established by Executive Order 182 that was signed by former President Benigno S. C. Aquino III on May 29 last year, provides incentives to three car makers to locally produce three car models with a production volume of at least 200,000 units for up to six years, or an average of 33,333 vehicles per year.

So far, there are only two car makers who have qualified to join the program amidst its stringent volume requirements: Toyota Motors Philippines Corp. and Mitsubishi Motors Corp.

The program provides auto manufacturers and parts makers operating in the Philippines P4.5 billion in annual support for six years beginning 2016, or P27 billion in total, as well as other non-fiscal measures.

“You would think that (additional taxes) would not be supportive of the growth of the auto industry because it will curtail demand. But of course, we are also considering the side and objectives of the Department of Finance,” she added.

The first package of the Duterte administration’s comprehensive tax reform plan includes a restructuring of the current tax rates imposed on automobiles, more than doubling the existing excise tax from 2% to 5% for automobiles with prices below P600,000; 20% for those selling for P600,000 to P1.1 million; 40% for those with prices ranging from P1.1 million to P2.1 million; and 60% for vehicles selling above P2.1 million.

The proposal would restructure the excise tax on automobiles but would not include buses, trucks, cargo vans, jeeps, jeepney substitutes and special purpose vehicles.

While being open to the possibility of a dampened car demand, the BoI official said that “eventually, people will just save up to buy,” echoing a sentiment shared earlier by car companies that vehicles will always be a necessity.

“That’s why I said it was at the outset, because that’s what you would expect. But that doesn’t necessarily mean a ‘ no.’ It still needs to be studied,” she added.

The Chamber of Automotive Manufacturers of the Philippines, Inc. ( CAMPI) is yet to take an official position on the matter, but some member car companies have said earlier this month that there might be a large although temporary impact on the industry.

In separate interviews made earlier this October, officials from Isuzu Philippines Corp. and Mitsubishi Motors Philippines Corp. expect local demand to be affected by higher taxes, but maintained that they are waiting for the final structure of the tax plan before giving an official position. —