Vehicle makers gear up against higher excise tax

MANILA, Philippines - The Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) is set to submit to the government a unified position paper that would likely buck the proposed higher excise taxes to be slapped on new vehicles.

“They’re crafting a position paper right now. An industry position on the argument that it would really affect industry sales. If sales go down, it is not only us, we also have a lot of downstream suppliers that would be affected,” Mitsubishi Motors Philippines assistant vice president for vehicle sales group Dante Calma said yesterday on the sidelines of the launch of the company’s auto financing business.

Calma said the proposal to increase excise taxes on vehicles would likely drag down the growth of the country’s booming automotive industry.

“I’m sure it will happen (slowdown of sales). Anything price related impacts immediately on car sales. For example, a P600,000 car. If you add the proposed excise tax, the increase is about P60,000 to P80,000. So if you have a budget of P600,000 then you go back to buying a second-hand car probably,” he said.

“With what the government is proposing even the entry-level cars,which now I think the tax is only two percent, they plan to bring it up to five percent. Our customers for these low-end vehicles, they are not really rich, some are working on call centers and have a small family. So even a small addition to cost they value it,” Calma added.

Calma cited Thailand as an example wherein automotive industry growth suffered after implementing a new tax system.

“There’s a slowdown in Thailand right now because they implemented a new system beginning January this year. Their sales which are about one million, it tapered. I think all countries have some form of excise tax but the difference is the degree of tax that they are implementing,” Calma said, noting the same slowdown could happen to the Philippines should the proposed tax hike be implemented.

With the country’s rising middle income segment and increasing affordable financial schemes, total industry sales volume is expected to jump to 500,000 to 600,000 units by 2020.

As of end-October, a joint report released by CAMPI and Truck Manufacturers Association showed vehicle sales picked up 24.5 percent to 292,502 units from 234,951 units during the same period last year.

The proposal to hike excise taxes on vehicles is part of the current administration’s tax reform package.

The Board of Investments, an attached agency of the Department of Trade and Industry, for its part has started consulting stakeholders on the possible impact to the automotive sector of the planned higher excise taxes on motor vehicles.