Philippine Government’s Planned EXCISE TAX on NEW CARS Causes Collective Groan

Even those who can afford to and will buy the newest and latest car models from automobile brands probably won’t be able to help but feel the pain of those who are hopelessly out of the buying range for these same vehicles, if some of the latest sweeping tax reforms recently announced by the Department of Finance (DOF) actually get passed through Congress. The ones that are most worrying to car companies and car importers both are the new excise tax revisions being proposed, divided into different price brackets even.

The Philippine Star reports that the government is going ahead with the excise taxation to both add a new source of revenue as well as to manage the volume of vehicle traffic on major roads, by discouraging people from buying more cars likely. Representative Dakila Cua of Quirino has passed a house bill that would see existing 2 percent taxes on high-end motor vehicles priced up to 600,000 Pesos go up to 4 percent, and cars between the 600,000 to P1.1 million price range will have their 12,000 Peso tax similarly doubled to 24,000 including 40 percent of the amount in excess of 600,000 (from 20 percent).

In light of these new tax schemes, a Hyundai Eon GLX M which would have the current suggested retail price (SRP) of 508,000 Pesos will become 528,320. On the other end of the price spectrum a Toyota Fortuner 2.8V 4WD SUV will go from 2,126,000 to 3,398,000 Pesos. That’s already a big ouch for Filipinos used to buying cars from brands that have been around the country in forever. Any classy vehicle from Europe on the other hand will (theoretically) be hit with a high enough excise tax to raise their prices as high as over 50,000,000 pesos.

But where does that leave buyers then, when the SUVs that are such a common sight on roads these days become even more expensive than they already are? Already House Deputy Speaker Rolando Andaya is subtly suggesting to the public to make their purchase of a Mitsubishi Montero Sport (for instance) now, before excise taxing makes it feel like costing an arm and a leg. On the other end Finance Secretary Carlos Dominguez would like to assure the automotive market that the Comprehensive Tax Reform Program (CTRP) will not kill or even decimate their businesses. Sales may slow down perhaps, but he is certain the industry needs only an adjustment period to adapt and thrive in the new condition.

One thing’s for sure: ominous as the CTRP may be, it’s still managed to win some support from prominent quarters like the Ayala Group. They see the whole package as being able to increase disposable income from everyone in the country save the top 0.002 percent, spurring the economy and helping people save more. Time will tell if the car makers, importers and buyers see it that way.