Luxury cars’ prices to increase by a third with excise taxes

Excise taxes of small cars with a price of up to R600,000 has been raised to 4 percent in the new Senate tax reform bill instead of the current 2 percent while a luxury BMW X5 will increase by R3.2 million or from R6.6 million to R9.8 million.

Senator Sonny Angara, chair of the Senate Ways and Means committee, said they adopted this progressive version similar to House Bill (HB) 5636 where the most expensive cars will be taxed at much higher rates while taxes of lower-end models will only slightly increase.

This is to make car ownership more inclusive as the Senate noted a Department of Finance data which showed that at least 80 percent of Filipino households do not own cars.

Based on the new Senate tax reform measure, there are five tax tiers to cover various price ranges of cars based on the net manufacturer’s price.

The smallest car or those models with price of up to R600,000, the price excise tax would be at 4 percent.

For example, a Toyota Vios will approximately increase by R20,000 or from R812,000 to R832,000 while a BMW X5 will increase by R3.2 million or from R6.6 million to R9.8 million.

Cars of over R600,000 to R1.1 million will be taxed R24,000 plus 35 percent of excess of over R600,000. Cars of over R1.1 million to R2.1 million will be slapped with R199,000 tax plus 55 percent of excess over R1.1 million.

Over R2.1 million to R3.1 million will be slapped with R749,000 plus 90 percent of excess over R2.1 million. Cars over R3.1 million will be taxes with R1.649 million plus 100 percent of excess of R3.1 million.

The Senate version has exempted hybrid and electric cars to encourage greener and cleaner transportation options.

The automotive tax is part of the new Senate version of the tax reform bill which includes new bracket incomes that seek to exempt around 64 percent of workers will be exempt from paying income tax, new taxes on fuel and sugar sweetened beverages.

SB 1592 is expected to result in estimated revenues of at least R134 billion that will partly finance the construction of the government’s massive R8-trillion infrastructure program.