Date:
May 2003
Vehicle Tax Rules Still Undecided
The
government is cool to a proposal from the
Senate to seek an increase in the floor of
the tax base on vehicles from P500,000 to
P750,000 as a trade-off for approval of the
automotive tax bill. Government opposition
is based on the claim that it would suffer
significant revenue losses as a result of
raising the floor. Earlier the Board of Investments
(BoI) and the Department of Finance (DoF)
had endorsed a draft bill imposing a 3-percent
tax on vehicles priced below P500,000 with
an incremental tax applied to higher priced
vehicles. For those vehicles priced above
the threshold, there would be an excise tax
applied of P15,000 plus 15% of the value in
excess of P500,000. The Finance Department
is seeking to raise around P1.14 billion from
imposition of the excise tax.
Under current arrangements, Asian utility
vehicles, vans and sports utility vehicles
are except from any taxation because they
have more than nine seats. They also account
for the largest segment of sales within the
local automotive market. Passenger cars account
for around 30% of the current market and generate
some P2.5 billion in taxes annually for the
government. Under the Senate proposal, a shift
in the floor price for collecting tax would
see all AUVs brought into the 3% tax bracket.
These are the vehicles with the highest local
content and hence the highest potential for
export. Members of the Senate committee looking
into this issue believe that this edge should
be retained in any restructuring of the market.
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