DTI reviews plan to peg 15% excise tax on AUVs

Government is rethinking its plan to peg a flat 15-percent excise tax on the sticker price of all passenger-carrying motor vehicles, deferring its decision while studying how to tax high-end Asian utility vehicles (AUVs).

Trade and Industry Secretary Manuel Roxas II told reporters over the weekend that the government has not made a decision on the proposed flat rate which would remove the exemption of high-end AUVs.

The proposal has been discussed at the senior staff level of the Board of Investments (BOI) but the decision was deferred until the board concluded its consultation with the automotive industry, Roxas said.

He said the BOI was requested by the Senate Tax Study and Research Office to give its position on the proposed excise tax restructuring since it was the head implementing agency of the Motor Vehicle Development Program as well as the incentive schemes under the government’s various investment programs.

However, Roxas said the BOI was still consulting individual motor vehicle assemblers and parts manufacturers to get their position on the proposed tax reform.

"We remain committed to supporting the development of AUVs," Roxas said. "But we also need to look at the status of high-end AUVs which have higher retail prices and cater to the higher end of the retail market but continue to be exempted from excise tax."

Roxas admitted, however, that the production of AUVs use more local content than other motor vehicle models manufactured in the country and it also supports the small and medium enterprises engaged in parts manufacturing.

AUVs such as Toyota’s Tamaraw FX Revo, Mitsubishi’s Adventure and Izuzu’s Highlander have been the automotive industries top sellers.

These three models are also seen as ultimate replacements for the traditional jeepneys whose manufacturers reported that their sales have been severely affected by the increasing preference for the air-conditioned AUVs over other means of public transport such as jeepneys and even buses.

Under the law, the BIR exempts only vehicles with seating capacity of 10 and above from the excise tax. It earlier ruled that rear cargo or luggage-compartments that accommodate four more seats were not considered as passenger seats.

Meanwhile, opposition Senator Teresa Aquino Oreta assailed the plan of the Department of Finance (DOF) to increase taxes on Asian utility vehicles (AUVs) as she warned Malacañang that the move may lead to higher transport fares for ordinary commuters.

She said this DOF plan will hurt ordinary Filipinos who commute to work and school riding AUVs converted into"mega-taxis."

"The ones who will be hurt by this tax measure are the middle class and low-income groups who if they have extra money, use the relative comfort of mega-taxis to go to school or to work," Oreta said.

Oreta advised the DOF to come up with more creative measures to broaden the tax base and improve revenue collections instead of imposing more taxes on the disadvantaged sectors that President Arroyo vowed to help rise above poverty within the decade.