DOF’s ‘instant regulation’ alters auto sector landscape

Is the government guiding local business through legislation or through regulation?

This question remains unanswered especially for those in the automotive industry after being rocked by an "instant BIR ruling" that literally changed the business landscape in the sector.

Finance Secretary Jose Isidro Camacho and BIR Commissioner Guillermo Parayno recently signed BIR RR 4-003 dated Jan. 29, 2003 that was to take effect 15 days after its publication, which in turn was made two days after it was signed.

The "surprise ruling" effectively lifts all excise tax exemptions of all AUVs or Asian utility vehicles and SUVs or sports utility vehicles presently available in the local market.

It’s referred to as a "surprise ruling" by those in the industry because they do not remember having attended nor having been invited to any public hearing prior to its hurried announcement, publication and eventual implementation.

The regulation did not actually take out the 10-seater excise tax exemption, however, changing the long-accepted standards of measurements and adding other qualifying requirements that were not specified before, effectively took away the exemptions from the AUVs and SUVs that were configured and designed to conform to present government-accepted standards.

Now, whether the changes in standards were beneficial to the government due to the projected taxes to be collected from the limiting of the tax exemption or to the buying public who may have more comfortable vehicles sans "forced seating configurations" conceived just to avail of tax exemptions are not the issues here.

One of the main issues is the instant implementation of the ruling, without the benefit of consultations or hearing involving those who would be directly affected. Business leaders presume that it is incumbent on the leadership of the DOF the understanding that business is not being run on "spur-of-the-moment" decisions. Marketing plans are drawn on long-term basis, not on a day-to-day mill. Coming up with "projection-shattering" regulations like this can make business executives climb up walls and foreign investors swearing never again to consider our country for further investments.

According to some legal minds in the industry the new regulation also not only presented itself as unconstitutionally a "legislation" emanating from the executive branch of government, it also literally pre-empted the Congress, which is presently in the process of working out some amendments into the existing tax laws that govern the automotive industry.

The new regulation would effectively increase 35-50 percent additional taxes on all AUVs and SUVs presently in the market. "Pogi points" for the DOF, which is constantly in search for business sectors and professionals to bleed in order to help in narrowing the budgetary deficit. But some political observers are seeing it some other way. They are saying that this is the defensive reaction of the DOF to the poised investigation threatened by Sen. Gene Magsaysay to look into allegations that some manufacturer has been favored with the 10-seater standards set and approved by the BIR. To pre-empt the investigation, as speculated by these political observers, the DOF came out with this "instant ruling", but to the detriment of almost all the players in the industry. I really don’t know how valid this speculation is?

Now, what would this 35- to 50-percent increase in taxes mean to the automotive market? Simply put, this would translate to AUVs starting to be prized at more than P1 million and SUVs to P2 million. That’s a double hit – the manufacturers and the buying public.

But what I would consider the worst implication of this "instant rule" is its effect on the labor front of the industry. A "knee-jerk" reaction of the manufacturers to an "instant ruling" could be anywhere from reduced production to outright plant closure –whichever way it goes it would mean lost jobs in varying proportions.

I just hope this is not the government’s new definition of "political will".

Dept. of Education – new leaders, new rules?

Many public school teachers are reportedly in dire straits nowadays as they suddenly find themselves almost nowhere to go for fast financial assistance.

This is reportedly due to the implementation of a re-accreditation program for private lending institutions that are extending loans to public school teachers. These lending institutions collect the monthly repayments of these loans through the APDS or Automatic Payroll Deduction Scheme.

Being espoused by Undersecretary Juan Miguel Luz, the re-accreditation program also includes the imposition of a ceiling on the effective rate of interest due to these loans, a move that the involved private lending institutions regard as contrary to existing laws.

As all these radical changes on long-time accepted and established policies that were all dictated by the General Appropriations Act and other government implementing rules and regulations are being pushed by the newly-appointed undersecretary, the teachers in the meantime are turning to high, daily interest loans to help them go by financial problems and even their daily subsistence.

To begin with, this again falls into the category of an "instant rule" made into effect by the Dept. of Education considering that it was reportedly announced to the lending institutions about two days after its supposed effectivity. They say that aside from being "instant" it was literally a "secret" for a few days after it was supposed to take effect.

Some quarters are saying that this smells of what’s normally done when new authority takes jurisdiction over some territory–"nagpapakilala".

Whatever, it would be interesting to find out how the scenario would unfold in this looming controversy involving the new leadership of the Dept. of Education. Whichever way it goes, we just hope that the teachers concern would be paramount over some possible personal agenda.

We’ll watch and we’ll keep you posted.

Mabuhay!!! Be proud to be a Filipino.

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