RP car makers lobby for retention of AICO scheme

Local car manufacturers are lobbying for the retention of the ASEAN Industrial Cooperation (AICO) scheme despite the implementation of the ASEAN Free Trade Agreement (AFTA) next year.

Industry sources said "the AICO scheme is still feasible even with the implementation of the AFTA."

AICO is a cooperative arrangement that involves at least two member countries of the ASEAN. The scheme includes not only the physical movements of products between the two countries but also resource sharing, industrial complementation and other industrial cooperation activities.

It also aims to provide multinational companies preferential terms on inter-regional trade in preparation for the AFTA in 2003.

As such, exchange of goods under the AICO scheme translates into minimal tariffs of zero percent to five percent.

Industry sources said there has been a surge in AICO application in anticipation of low duties which may be availed of with the implementation of the AFTA in 2003.

They said companies, especially those in exports, are already taking advantage of product swaps at low tariffs to establish business contacts ahead of competitors even before AFTA comes into force.

Aside from the Philippines, Malaysia had also earlier supported moves to retain the AICO scheme.

Both the Philippines and Malaysia had agreed to drop the preferential rate under the AICO scheme to zero percent.

Meanwhile, the Bureau of Internal Revenue (BIR) and the Department of Finance (DOF) are set to review once more the taxes on vehicles particularly those with a seating capacity of 10 or more.

"Actually the bureau (BIR) has already reviewed the issue of excise tax on automobiles. But they are again making another review especially on the so-called 10-seater AUVs," government sources said.

For several years, automakers have not been paying taxes due to the 10-seater rule, which exempts them from the excise tax. The BIR had wanted to lift this exemption, saying this will raise anywhere from P500 million to P5 billion in additional revenues for the government.

However, the Department of Trade and Industry (DTI) has opposed the plan, saying this would hurt the industry. Auto makers claim that lifting the exemption would not increase revenue collection for the government since there would be lower car sales due to higher retail prices.

Arnel Doria, Honda Cars Philippines deputy head for marketing said that if government will start imposing excise taxes on their Asian utility vehicles (AUVs) then, "they should do so for all automobile assemblers. Why are they raising the issue now?" – Ted Torres