BOI favors value-based tax on vehicles

The Board of Investments (BOI) appears set to adopt a value-based excise tax system on motor vehicles, disregarding the position of local car manufacturers who are lobbying for the continued engine displacement-based excise tax system.

The BOI’s position was revealed yesterday by Gregory Domingo, managing head of the BOI. Speaking at a joint press conference of the 4th Conference on ASEAN Auto Supporting Industries, Domingo said among the major changes that the government is eyeing in the Motor Vehicle Development Program (MVDP) is a value-based taxation system.

Domingo’s announcement came as a surprise to the Philippine Automotive Federation Inc. (PAFI).

PAFI president Vicente Mills said he was surprised that the government had made up its mind without informing local car manufacturers. He said that during their last meeting, the BOI indicated that it would adopt a combination of value-based and engine-based taxation system.

Local car manufacturers, Mills said, had been under the impression that an engine-based tax system would ensure that entry-level vehicles with the lowest engine displacement would have the lowest tax.

The BOI, Mills said, had said that it would call another meeting with local car manufacturers before it finalizes its position on the revised tax system.

The government, Mills acknowledged, prefers a value-based excise tax system because it would be easier to impose unlike in the present system based on engine displacement wherein local car manufacturers have opted to downsize the engine on some luxury sports utility vehicles to be able to avail of lower taxes.

Aside from the excise tax, government will also include in the MVDP more clear-cut policies on the importation of second-hand vehicles.