AUTO INDUSTRY NEWS

Congress eyeing revised two-phase, five-bracket auto excise tax system

Congress eyeing revised two-phase, five-bracket auto excise tax system image

Vince Pornelos / AutoIndustriya.com | May 05, 2017 18:42

New car excise tax system will have two stages, lower rates, 5 brackets

In the last week there has been a lot of information spreading on social media about the impending excise tax on automobiles, one of the components of the Comprehensive Tax Reform Program (CTRP) put forth by the Department of Finance (DOF) for the House of Representatives under House Bill 4774.

The CTRP was initiated after then-presidential candidate Duterte promised the voting public a tax reform that would see personal income taxes (PIT) lowered. The CTRP was crafted to be a pro-poor tax reform plan, and will lower (or even remove) income taxes from low-income Filipinos, but will levy heavier taxes on many goods, including fuel and automobiles

Now, according to an update given to us by our sources, there's a new version of the excise tax on automobiles. We have outlined the new two-phase, five-tier automobile excise tax below alongside the current and the initial terms of HB4774. 

Congress eyeing revised two-phase, five-bracket auto excise tax system

The key changes include a two-phase implementation schedule with the initial stage in January 1, 2018 followed by the second stage on January 1, 2019. There is a new 5 bracket classification system (previous: 4); effectively splitting the previous bracket of PhP 2.1M and above to become two with (a) PhP 2.1M to under 3.1M and (b) PhP 3.1M and above. There are also lower rates than the ones outlined in HB4774 that we reported earlier.

AutoIndustriya has yet to run a simulation of how these revised rates will affect automobile prices, though based on our previous simulation of how HB4774 will affect costs, it appears these new rates will be more manageable for the industry.

The previous schedule under HB477 caused an uproar given its potentially damaging effect to the country's premium and luxury sectors. Several car company executives, they expressed their concern at the tax rates and its effect on their prices, so much so that some are open to considering closing down operations if the prices resulting from the excise tax will no longer make fiscal sense. 

Our sources indicate that this new version of House Bill 4774 passed its first reading at the House of Representatives Ways and Means Committee on Wednesday, May 3, 2017. The voting within the committee resulted in 17 for and 3 against. 4 abstained.

For this bill to become law, it will have to pass two more readings at the House of Representatives, followed by a bicameral session with the Senate, and if all goes well for it, the final version will be signed by the President into a Republic Act.

What do you think of the revisions to the excise tax package?