Two US car firms buck proposed 15% excise tax on cars

At least two American automotive manufacturers do not agree with the Arroyo government’s plan to revise the tax imposed on motor vehicles.

The Board of Investments (BOI) is seriously considering the imposition of a flat excise tax of 15 percent on passenger cars and motor vehicles carrying up to 10 people.

Asian utility vehicles, though, will still be exempt from the tax. At present, the government imposes an excise tax based on engine displacement.

According to Terry Emrick, president of Ford Motors Philippines, the excise tax should be based on the retail price and the rate should be 10 percent at most.

AUVs, Emrick added, should not be exempt from such a tax. He does not find any merit in government’s argument that AUVs should continue to remain tax-exempt because they are affordable.

In fact, Emrick revealed, the average selling price of local cars is around P668,000 while the average price for AUVs is P771,000.

As such, Emrick argued, why should AUVs be exempt from taxes when they actually cost more than cars.

Trade and Industry Secretary Manuel Roxas II had said that he favors the retention of the tax exempt status of AUVs as they are the most affordable vehicles for the budget conscious Filipinos.

AUVs, Roxas said, are used for mass transport and by most small and medium enterprises.

Harold Koh, president of General Motors Automobile Philippines, Inc. (GMPh), also disagreed with the planned 15-percent excise tax.

According to Koh, this is not the time to change the tax system when times are tough.

He warned, "if government changes the tax structure today, it may disrupt the automotive industry which is not in good shape right now."

However, for the long-term, Koh agreed that the tax should be "equitable." But for now, Koh said, it may be better to defer the change.

At present, the government imposes a 15-percent excise tax on engine displacement of up to 1800 cc or gasoline up to 1800 cc for diesel. The rate increases to 35 percent for engine displacement of up to 2000 cc for gasoline and 2300 cc for diesel.

For engine displacement of 2700 cc for gasoline and up to 3000 cc for diesel, the rate is 50 percent.

A 100 percent excise tax is slapped on engine displacement of 2701 cc and above for gasoline and 3001 cc and above for diesel.

AUVs are, however, exempted from the excise tax based on engine displacement due to the seating capacity rule wherein vehicle carrying 10 or more passengers are exempted.

Imposing a flat excise tax of 16 percent on motor vehicles would help the Arroyo government raise much needed revenues. – Marianne Go