Define ‘automobile’, Congress asked

The Department of Finance (DOF) and the Department of Trade and Industry (DTI) will ask Congress to redefine the term "automobile" in a move to correct the inequities and plug the loopholes of the existing excise tax system of the local automotive industry.

Trade and Industry Secretary Manuel Roxas II said the DOF and DTI have come up with a draft bill that would clearly define the term "automobile" for purposes of excise taxation.

Specifically, Roxas said the term "automobile" will include vehicles with 10 or more seating capacity such as passenger vans, Asian utility vehicles, 4x2s as well as pick-ups.

The current definition of "automobile," Roxas said, is "inequitable and biased against smaller cars (sedan type), since an automobile with a seating capacity not exceeding nine (including the driver) is subject to excise tax."

"At the same time, an automobile that can accommodate at least 10 passengers are exempt from excise tax," Roxas explained.

Aside from clearly defining the term "automobile," Roxas said the draft bill recommends a rationalized tax system by adopting a simple value-based taxation scheme.

If adopted by Congress, the proposed bill, which would amend the existing National Internal Revenue Code of 1997, would do away with engine displacement and fuel type differentiation as the basis for computing the tax, and instead adopt a simple value-based taxation.

It would also establish an appropriate index which would be done by the National Statistics Office and used by the DOF to adjust every two years the price brackets used by the tax base or whenever an extraordinary inflation or deflation of the currency occurs.

The proposed bill would also retain the tax exempt status of automobiles provided these are not for sale and would be used by persons or entities operating within the freeport zone.

The proposed bill will define "automobile" as any four or more wheeled motor vehicle regardless of seating capacity, which is propelled by gasoline, diesel, electricity or any other motive power and specially designed to transport persons not primarily to transport freight or merchandise.

Light commercial vehicles designed to carry both passengers and cargo which may be classified under, but not limited to utility vehicles, sports utility vehicles, AUVs, commuter vans and special cargo vehicles as well as those used for mass transportation such as buses and jeepneys will not be covered by the definition. – Marianne V. Go