Update on proposed tax law on vehicles

[April_Ryan]

hi all!

FYI, got this from the inquirer.

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Compromise on auto tax reform bills proposed
Posted: 0:35 AM | May 13, 2003

Gil C. Cabacungan Jr.
Inquirer News Service

THE SENATE is reviewing a proposal to raise the floor price in the vehicle tax base as part of a compromise deal to get the much-delayed automotive tax reforms approved before Congress goes on recess next month.

A government source said lawmakers were looking into the possibility of raising from 500,000 to 750,000 pesos the cut-off price for vehicles that would get the minimum three percent tax.


The increase would minimize the impact of the new taxes on Asian utility vehicles, which are sold at an average of 600,000 to 700,000 pesos per unit. Based on the pending bill in the Senate, all vehicles worth between 500,000 pesos and one million pesos will be slapped an excise tax of 15,000 pesos plus 15 percent of the value in excess of 500,000 pesos.

The enactment of the automotive excise tax bill, which has been passed in the House of Representatives in March, has been hobbled by concerns over the effect of the new taxes on the sale of AUVs.

These Philippine-designed vehicles, which combine the comfort of a sedan with the versatility of a pick-up truck, are the industry's best-selling models with the highest local content.

The source said Senators Serge and John Osmeña would continue opposing the vehicle tax reforms unless the incentives given to AUVs were retained. The Osmeñas believe that AUVs are potent export products. AUVs are currently exempt from excise tax under a Bureau of Internal Revenue rule that exempts vehicles with a seating capacity of at least 10 persons.

Aside from lowering the base vehicle price, Senators were also looking at a proposal to cut the minimum tax rate to one percent from three percent to ease the tax burden on AUVs.

But the source said this was impractical considering that this would mean throwing back the bill to the House of Representatives for review unlike the proposed change in the base price, which could be amended during the bicameral stage.

The source said the Senate had committed to pass the bill before its session ends on June 5. The Senate is under pressure from the Department of Finance to approve the bill on May 19 or else the new tax rates under Revenue Regulation 4-2003 would take into effect and distort vehicle sales.

The Senate, however, has declared that it would not abide by any deadline by the finance department, which means the government has to defer or abandon RR 4-2003 to avoid any disruption in sales.

[April_Ryan]

Excerpt from a special report, also from the inquirer.

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Car tax bills in the making

Congress is now working on two bills that will replace engine displacement and differentiation according to fuel type as bases for taxation with the "net manufacturer's price."

Senate Bill 2157 and House Bill 5719 prescribe:

• a three-percent excise tax on vehicles priced at up to 500,000 pesos;

• for vehicles prices at 500,000 to one million pesos, a tax rate of 15,000 plus 15 percent of the value in excess of 500,000 peso;

• for vehicles priced at over one million up to two million pesos, a tax rate of 90,000 pesos plus 30 percent in excess of one million pesos; and

• for vehicles priced at over two million pesos, a tax rate of 390,000 pesos plus 50 percent in excess of two million pesos.

Under the proposed revenue scheme, a compact sedan with a net manufacturer's price of 650,000 pesos, for instance, will have a tax-inclusive price of about 687,500 pesos -that is, 650,000 pesos plus 15,000 pesos and 15 percent of the value in excess of 500,000 pesos, in this case, 15 percent of 150,000 pesos, or 22,500. In the existing tax structure, the same car should have a tax-inclusive price of around 877,500 pesos.

Both SB 2157 and HB 5719 remove the AUV's tax-exempt status because they no longer put distinctions in the definition of an "automobile."

Dreaded RR 4-2003

In case these bills fail to make it before Congress goes on recess next month, the Bureau of Internal Revenue is all set to roll out Revenue Regulation 4- 2003. RR 4-2003 tightens the implementation of the seating capacity rule, which exempts from excise taxes utility vehicles that can seat 10 or more persons.

Placed in a devil-and-the-deep-blue-sea situation, the auto industry is picking the lesser evil. It is backing SB 2157 and HB 5719.

The Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) says in a position paper that if RR 4-2003 is implemented, "the resulting situation alone could hardly be considered conducive to the expansion of the market since it will make prices of AUVs and various passenger vans skyrocket to unaffordable levels by as much as 35 to 50 percent."

The CAMPI says that if the bills pending in Congress become a law, an AUV currently with a tax-inclusive price of 664,679 pesos will carry a tax-inclusive price tag of 687,821 pesos. If RR 4-2003 takes effect, that same vehicle will have a tax-inclusive price of 997,020 pesos, it says.

Win-win situation

A recent Senate study done on RR 4-2003 shows that the retail prices of AUVs, pickups and vans will increase as a result of this revenue-generating plan, while luxury cars produced by companies like BMW, Mercedes Benz and Porsche, usually priced at over one million pesos, will enjoy price cuts of between 20 and 50 percent.

Under the BIR tax scheme, a model of the Toyota Revo van currently priced at 850,000 pesos will be priced at 899,853 pesos. A Mitsubishi Adventure van will retail for around 698,603 pesos, from the present 675,000, and the Isuzu Crosswind van will each cost 921,703 pesos, from its present 869,000 pesos.

The Toyota Hi-Ace van, which costs about 827,000 pesos each, will cost 873,403 pesos under RR 4-2003, and the Mitsubishi L300's price tag will reach 882,603 pesos, from 835,000.

High-end sports utility vehicles, such as the Toyota Prado, will cost 2.03 million pesos under the new scheme, down 26 percent from the current price of 2.75 million pesos. Prices of the Toyota Land Cruiser will go down by 39 percent from five million pesos to 3.04 million, while the Ford Escape will be 21 percent cheaper at a range of 880,196 to 1.1 million pesos.

With this much disparity in RR 4-2003, the auto industry is left with little choice but to throw its support behind Congress.

"The new excise tax bill will result in a win-win situation that will lead to market expansion for the automobile industry, as well as increase investor confidence that will transport the domestic market into a base for export of vehicles and parts," the CAMPI says in its position paper.

It adds: "What's more, with a wider choice of car models that's competitively priced entering the market, more Filipinos will finally fulfill their dream of owning a brand-new vehicle."

[Hiroko]

anu na po ang update dito?