BOI seeks ‘creative solution’ to SUV excise tax issue

The Board of Investments (BOI) hopes to plug the loophole on the payment of excise taxes under the 10-seater capacity exemption early next year.

Whatever the decision, the BOI said it will make sure that Asian utility vehicles (AUVs) will continue to remain exempt from the payment of excise taxes.

Trade and Industry Secretary Manuel Roxas II said the BOI has to find a "creative" solution since the legislative process could take some time.

The DTI head and BOI chairman acknowledged that the 10-seater capacity exemption is being used by some motor vehicle manufacturers as a loophole to avoid paying excise taxes.

He acknowledged that the 10-seater loophole allows "this funny situation" where four seats are squeezed into the cargo space of sports utility vehicles simply to make the 10-seat hurdle.

The problem, according to Roxas, is that if the 10-seater rule is scrapped, both SUVs and AUVs will be affected.

AUVs, Roxas said, are the entry-level vehicle for most Filipinos. He said the 10-seater exemption was intended to help the AUVs, but SUVs have been able to use the same exemption.

According to Roxas, "we can close the SUV loophole, but we will also close it for AUVs. So we’re trying to be creative so that we could close the SUV loophole without closing it for the AUVs.

One possible route Roxas said, is through legislation. But the danger with congressional action, Roxas noted, is that "it could be six months later. It could be a year later. And it may never happen."

Another possible option, Roxas said, could be a shift from excise taxes to ad valorem taxation which would be based on the retail price. Excise taxes are currently based on engine displacement.