Makati court stops new tax rule on imported vehicles

MANILA, Philippines - A Makati regional trial court has temporarily prevented the Department of Finance (DOF), Bureau of Customs (BOC) and the Bureau of Internal Revenue (BIR) from implementing a new tax regulation seeking to impose duties and taxes on imported vehicles.

In a temporary restraining order dated June 3, 2010, Judge Winlove Dumayas of the Makati Regional Trial Court Branch 59, prevented the DOF and the two attached agencies from enforcing Joint Order 1-2010 dated April 5, 2010.

The order seeks to impose duties and taxes on imported vehicles based on their “book value” instead of the current “transaction value” as mandated by the Tax Code.

The court acted upon a complaint filed by car importer Benjamin Navea who argued that the regulation would cause “grave and irreparable” injury to vehicle importers insofar as it changes the current transaction method of customs valuation.

Navea claimed that due to the planned shift to the book value system, he would pay an estimated P1-million in taxes and duties for a new Mitsubishi Pajero he plans to import from the United States versus only P500,000 or half the amount if the current transaction value pursuant to R.A. No. 9135, was applied.

He said the government has no basis for use the reference price as primary method of valuation.

 “What the law mandates is to look at the price paid or payable for imported goods resulting from the actual transaction between the buyer and the seller… and not on extraneous factors such as reference prices obtained from third party sources, e.g., book values for motor vehicles,” Navea said.

He said the current valuation system is called “transaction value” since imported goods are assessed based solely on the transacted amount. “To now use a reference price, that book values are, is to negate the very essence of the transaction value system established by law,” he said.

Furthermore, Navea claimed that the order is discriminatory since it alters the valuation system only as far as personal or commercial car imports are concerned to the exclusion of the rest of all classes of imports.

Named respondents in Navea’s complaint are Finance Secretary Margarito Teves for the DOF, Customs Commissioner Napoleon Morales for the BOC and Commissioner Joel Tan-Torres for the BIR.