Government mulling excise tax on Asian utility vehicles

The normally affordable Asian utility vehicles (AUVs) plying Metro Manila’s streets may soon be considered luxury vehicles. That is, if a recent proposal made by some Department of Finance (DOF) officials gets approved.

Sources within the DOF said it has been proposed that excise taxes be levied on AUVs which are now competing with the humble jeepney as the most popular mode of public transportation for Filipinos.

The sources said some DOF officials are looking into AUV excise taxes as a replacement for the modified gross income taxation which President Arroyo has proposed to increase government revenues.

"The excise taxes are easier to implement since it does not require legislation," the source said.

The modified gross income taxation calls for lower tax percentages on an individual’s total income. It has been opposed by no less than International Monetary Board (IMF) experts who said that the government is not yet ready to implement it.

Those pushing for excise taxes on AUVs said the move will generate an additional P5.5 billion in additional revenues for the government each year, bigger than the projected P4.5 billion that would be generated from the modified taxation scheme.

AUVs, such as the Toyota Revo, Isuzu HiLander and Mitsubishi Adventure, are exempted from excise taxes which the government requires from 4 x 4 sport-utility vehicles usually purchased by affluent people.

The sources said the idea of including AUVs in the list of vehicles to carry excise taxes was proposed during the time of Finance Secretary Alberto Romulo but the suggestion was shelved in favor of gross income taxation.

Mrs. Arroyo announced the latter scheme in her State of the Nation Address last month and urged Congress to come up with a law allowing it.

The imposition of excises taxes on AUVs, according to the DOF sources, would only happen if a uniform tax scheme is used on all motor vehicles, regardless of make and size. This, they say, is easier to implement since it does not require legislation.

However, this early, the automotive industry is already opposing the suggestion to levy additional taxes on AUVs which now rival the jeepney as the country’s most popular mode of transportation.

Ariel de Jesus, communication officer of Toyota Motor Philippines, said they cannot in any way agree with the suggestion since it would mean an additional burden for motorists.

"We as manufacturers will not have any choice but to pass the cost to the consumers. The problem is, who will buy a Revo that costs P1 million? That will only pull down further the sales of motor vehicles," he said.

De Jesus noted that with the economic crisis the country is experiencing, imposing additional taxes on consumer goods such as motor vehicles would only cause additional hardships to manufacturers.

"If the government is looking for more revenues, it wouldn’t get it by imposing excise taxes on AUVs. For one, this will lead to increase in prices which in turn will lead to lower sales. Eventually, the industry will collapse and the government will end up with nothing except thousands of unemployed people."

The DOF is reportedly planning to present the AUV excise tax proposal during its meeting with the BIR, the Department of Budget and Management and the National Economic and Development Authority.