Auto makers ask GMA to veto new excise tax law

Local auto makers will lobby for a presidential veto against the new excise tax law on motor vehicles after the bicameral conference committee shortened the transition period for the effectivity of the new law from two months to 45 days.

Industry sources said that while automakers have largely conceded to the shift in the basis of the tax from engine size to value, there was a serious conflict over the effectivity date of the law.

Local automotive manufacturers complained that the 45-day transition period is too short and would affect their stock of vehicles that have not yet been sold and those that were ordered before the passage of the new law.

In the Senate version, the industry was given a transition period of three months, compared to two months granted by the House. When the integrated version was passed by the bicameral committee, however, the period was reduced to only 45 days.

According to an industry official, local automakers have already retooled their plants to a two-month production cycle since this was what they thought as the worst case scenario.

If car plants were geared for a two-month cycle and were only Automakers ask given 45 days instead, manufacturers could be stuck with a two-month inventory for sales projections that would not materialize because of shift in the tax base, especially for higher-end vehicles whose prices would go up when the law takes effect.

"We had no idea it would be cut down to 45 days" the official said. "The standard lead time is four months but we already calibrated to two months. We cant recalibrate again."

The official said top officials of local car assemblers have already met with Finance Secretary Jose Isidro Camacho to ask him to intercede on behalf of the industry.

According to Camacho, however, the Department of Finance would not have a hand in the business of the legislature.

"It’s no longer in our hands, it is up to Congress," he said. "If that is what the bicameral committee decided on, we can only follow."

Automakers are also planning to meet officially with Trade and Industry Secretary Manuel Roxas II.

Since Congress was not likely to budge on the transition period, auto manufacturers would lobby for presidential veto on the proposed law before it was signed into law after ratification by both houses of Congress.

The law, when in effect, would overhaul the excise tax structure on automobiles by shifting the tax base from engine size to manufacturer’s price while also imposing drastic cuts on the actual tax rate. – With a report from Marianne V. Go