PAFI nixes value-based excise tax on cars

The Philippine Automotive Federation Inc. (PAFI) has rejected the proposal of the Department of Finance (DOF) to change the basis of the excise tax for automotive vehicles from engine displacement to value.

In a position paper submitted to the Board of Investments (BOI), PAFI president Vicente Mills Jr. warned that the value-based excise tax system would create another loophole because "it would open the gates for price manipulation."

"A value-based excise tax system would be difficult to administer because it is indexed against an unstable currency exchange rate," Mills said.

Mills is concerned that the value-based excise tax system would also create a bias for bigger vehicles instead of supporting the smaller, more affordable and fuel-efficient vehicles.

"The bias for bigger vehicles would create a stress on roads and parking," Mills said, adding that "this would also impact on traffic and road safety as well as fuel consumption."

PAFI insisted that the proposed shift is "very drastic" and said the local automotive industry which has invested a lot in local manufacturing facilities may not be able to survive due to the negative impact of the scheme.

"The shift is a big risk considering that there is a slim borderline between success and failure with the proposed implementation of a value-based scheme," PAFI said.

The House of Representatives was able to pass on second reading on Monday House Bill 5719 which seeks to change the automotive excise tax system to a value-based scheme.