Car manufacturers press for export incentives from government

Car manufacturers said yesterday they are not asking for export subsidies but instead want the Department of Finance (DOF) to consider the possibility of giving export incentives in the form of "transferable" tax credits that they could use to offset part of their final taxes.

Car industry leaders met with the DOF yesterday primarily to resolve the ongoing dispute over the excise tax on Asian utility vehicles (AUVs) which the finance department has been trying aggressively to tighten up in order to raise additional revenues.

According to an official of Toyota Motor Corp., the industry did not actually ask for similar subsidies offered by Australia to its car exporters, saying that such schemes are not likely to prosper anyway since they violate the agreements of the World Trade Organization (WTO).

However, the official said the DOF could consider other forms of incentives such as transferable tax credits that could be used to offset the other taxes slapped on local car manufacturers.

"This would not entail actual cash subsidies from the government," the official said, adding, however, that some portion of the revenue would have to be given up in order to encourage exports.

Local car manufacturers said the Philippines could be a successful car assembler for the export market since its labor cost is still relatively low compared with its neighbors in Southeast Asia.

The industry said it only needs a few incentives to encourage capital formation and retooling of the industry for the export market.

The DOF, however, is not enthusiastic about giving the industry any form of export incentive until it can be proven that going into exports would be economically beneficial.

Finance Secretary Jose Isidro Camacho said the government would offer export incentives to car manufacturers if they can prove that producing cars for the export market will actually result in higher revenues, employment and overall economic activity.

The industry source, however, said the government need not even formulate a new car export development plan of its own, saying that there are existing models that the country could study and possibly follow.

"Thailand and Korea obviously did something right to make them such strong automotive manufacturers," the official said. "So why come up with a new plan? We can just look at those models and use them if they fit."