Toyota seeks gradual hike in auto excise tax

MANILA, Philippines – Toyota Motors Philippines Corp. (TMPC), the country’s market leader in automotive sales, said it is amenable to the planned excise tax hike on motor vehicles but urged the government for a “tempered” increase to avoid derailing the industry’s growth.

TMPC vice chairman Alfred Ty expressed concern on the government’s current proposed rate, saying it is too high and would be detrimental to the local automotive industry. 

“The looming excise tax puts a cloud for all manufacturers so how bullish we will be depends on regulation like those. We understand the government’s program in reducing revenue in some segments and recovering it in some segments including the car industry. So we’re all for that. We just have to temper it also because for the country to have continuous growth in the auto industry, it’s done with very careful calculation in listening to the customer’s voice so that includes pricing also,” Ty said.

The House of Representatives is currently considering an administration proposal that would jack up excise tax by 100 percent for vehicles costing up to P1.1 million, and by more than 300 percent for those priced over P2.1 million.

Under House Bill 4774 sponsored by Quirino Rep. Dakila Cua, the tax on automobiles priced up to P600,000 will go up from two percent to four percent, while those selling over P600,000 to P1.l million would be taxed at P24,000 (up from P12,000) plus 40 percent (up from 20 percent) of the amount in excess of P600,000.

Those selling over P1.1 million up to P2.1 million, meanwhile, would be taxed P224,000 (up from P112,000) plus 100 percent (up from 40 percent) of the amount in excess of P1.1 million.

Cars costing more than P2.1 million would have a tax amounting to P1.22 million (up from P512,000) plus 200 percent (up from 60 percent) of the amount in excess of P2.1 million.

These new rates, however, are still not acceptable to the automotive industry.

According to Ty, even an increase of P5,000 in the price of a vehicle would translate into a sales dip right away.

He said a P20,000 hike would make people think twice in buying, while a 40 percent to 60 percent addition would be detrimental.

“It is okay to come from all (segments) but it should be tempered. It should be lower rates so it doesn’t kill the sales. We still want to tweak and have a discussion on that. We will prepare an ideal rate,” Ty said.

“The industry grew not only based on the volume sellers. Even the medium market has contributed to that. So if there is a steep penalty then easily that takes 30 percent of the market volume that would get affected.

An even steeper penalty given to the luxury cars, although we understand where they’re coming from, but we also have to be careful not to kill the market.

The luxury car market in the country does not even comprise one percent of the total car volume. So it’s really a very small segment.

Now if you use that to raise revenue, I don’t think you get much from that small volume. People will just easily back off. If you use that as a reason to alleviate traffic, again its too small to make difference,”  he added.