Automakers reject BOI’s modified tax proposal

Chamber of Automotive Manufacturers of the Philippines (CAMPI) president Vicente Mills announced yesterday that CAMPI members have rejected the modified automotive excise tax proposal of the Board of Investments (BOI).

According to Mills, the local automotive industry rejected the BOI proposals for several reasons, foremost of which is the "instability of the tax proposal under adverse economic conditions."

The group also said they rejected the proposal because it promotes unstable market environment by fostering artificial pricing and it retards industry development of local parts and manufacturing technology.

CAMPI also said the BOI proposal demands an increased government intervention and administration as well as it is biased toward bigger vehicles which put more stress on fuel requirements and current road and parking infrastructure congestion.

The BOI has been pushing for a value-based automotive excise tax, while the industry supports a vehicle-type and engine displacement-based excise tax.

The modified BOI excise tax proposal incorporates a transition period of two years based on vehicle type and engine displacement and a lower rate from the current excise tax.

Both schemes incorporate a tax preference for vehicles priced within P600,000 which will be indexed to inflationary factors, primarily the foreign exchange rate.

Local automotive manufacturers expressed concern that BOI’s endorsement of price indexing can lead to the proliferation of other indexing schemes, that based on the Latin American experience, led to hyperinflation.

The local auto industry also said the BOI’s proposal effectively removes the excise tax preference of the AUV and marginalizes the AUV manufacturing program which it promoted with significant success.

Based on the two-year transition period proposed by the BOI, AUVs, pick-ups and passenger vans currently exempt from the excise tax and are priced within P600,000 will be taxed up to two percent, while those priced above P600,000 will be taxed up to six percent.

Excise tax rate for passenger cars will be gradually reduced 10 percent for basic models and up to 35 percent for luxury models while the sports utility vehicles will be taxed up to 15 percent.

In the third year, the BOI proposes that AUVs, pick-ups and 10-seater passenger vans priced within P600,000 be taxed at three percent.

On the other hand, passenger cars, SUVs, vans with less than 10 seat capacity and AUVs, pick-ups and 10-seater passenger vans priced above P60,000 will be taxed at 10 percent if priced within P1 million; 15 percent if the car does not exceed P2 million; and 25 percent for cars priced above P2 million.