Tax on the right to drive
Should car dealers make a killing now, up until the new tax law is passed? Should the public go into panicbuying mode – that is, if you don’t have the money, simply panic?
If excise tax is a tax on a privilege, then when you tax vehicles, one is actually taxing the privilege of driving. When there is insufficient public transportation though, driving one’s own car is not merely a privilege. It becomes a right. Everyone has the right to look after himself when public service options are not available. That means there’s the right to get to work and the right to take the children to school.
It is a privilege to drive a private vehicle in Singapore. Thus, you would pay an arm and a leg in taxes and fees to own one. It’s a privilege there because you don’t really need one with the available public and mass transport systems.
So the purpose of increasing excise tax on vehicles here can’t be the reduction of cars on the road. With poor public transportation, preventing people to own cars would simply be public punishment.
So let’s call spade a spade. Excise tax increase on private vehicles is simply to increase tax collection. And this proposed bill is like a wave which, although manmade and controllable, seems to be at this point unstoppable.
Let me put numbers behind the proposal, for the education of our readers. As the excise tax increase is a graduated one, the illustration below using percentages is merely for estimation and may not result in exact peso figures.
Based merely on excise tax increase, and providing a maximum of 20 percent profit margin of dealers plus VAT on the selling price, the least affected will be cars priced below P800,000 because these cars’ prices will only increase by an estimated two percent. So a P600,000 vehicle should be about P612,000 after effecting the increased excise tax rates. (You can say that these cars are what the government is encouraging people to buy.)
The increase becomes more felt on vehicles priced above P800,000 to P1.6 million, as the estimated increase would range from above two percent to 10 percent. So your P1.2- million car can become P1.28 million – a bit of a pinch, but surmountable.
When you get to the premium segments, now we’re talking. Your P3-million vehicle becomes P3.8 million, and your P4.5-million vehicle becomes P6.4 million. It’s getting into the realm of unaffordability. It will look worse for the real luxury vehicles as those selling for P7 million will now sell for P11.1 million. (These high-end car dealers are what the government may unwittingly kill as the high tax will drive down sales and business. Parallel importation can and will simply happen.)
There are, of course, minimal ways to be competitive. The high-end models can switch to more low-tech and less costly accessories. But then the public begins to lose out on safety features and useful instrumentations. The government loses out too on excise taxes that would have been collected on the high-end car sales if the excise tax increases were less prohibitive.
Folks who buy these expensive vehicles are supposedly also the target of fuel tax increase. Assuming oil prices are constant for three years (wishful thinking), the price of unleaded gas would increase by an annual average of five percent over three years using the new excise tax rates, while diesel price will increase by an annual average of eight percent over the same threeyear period. Of course, the rest of the public, rich or poor, pays for the same amount for fuel.
This piece is not so much about contesting the tax burden on owning a vehicle or the oil tax that will hit the poor than it is about pushing for the alternatives:
1. There must be road systems that have allotted lanes for bicycles and motorcycles. If EDSA is too late (I hope it’s not), the government should look at the rest of Luzon and the rest of the VisMin to mandate this feature. The worst example is EDSA where the middle lane is designated for two-wheelers, which poses real danger to life and limb.
2. Clean the Pasig River and its tributaries. Don’t give up. Make river travel a more viable and pleasant public transport system, with accessible, functional terminals, populated by better-looking and worthy boats.
3. Incentivize and further support electric vehicle development (we support gasoline stations as de facto recharging stations). Encourage partnerships between solar technology companies and auto manufacturers to take advantage of the country’s popular sun light resource. All auto manufacturers should have an eco-friendly model.
The tax may not, but the necessity and the environment may compel us to transition. That compulsion is a wave of self-preservation. It is unstoppable, but the dividends are enormous if we fan the winds of change.
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