Vince Pornelos / | January 23, 2017 17:22
House Bill 4774 to increase car prices of luxury cars by as much as 65.8%
(UPDATE: If you want to see how much a certain model could cost after the taxes are applied, read our comparative analysis here)
In the last couple of months, news of an upcoming excise tax hike on motor vehicles has had the automotive industry on edge.
The reports of the drastic price hikes that will be brought about by the said reform is making the auto industry nervous, especially since they just experienced a landmark year after exceeding their targets and selling 404,051 units in 2016.
Recently AutoIndustriya.com acquired a sample computation from the proposed new tax scheme, particularly the page detailing potential prices of vehicles at certain price brackets. The table presents an insight as to how much vehicle prices may increase if or when the bill passes into law.
The key thing to keep in mind is the NMISP, or Net Manufacturer's/Importer's Selling Price. This is not the same as the Manufacturer's Suggested Retail Price (MSRP or just SRP) which is the price we see at dealers.
The NMISP is the at-cost price of the manufacturer or importer, before taxes. Also take note that the prices at the two right-hand columns of the table do not indicate MSRP/SRP, as it still has to factor in 12% VAT and the dealer's profit margin.
For instance, if the NMISP is PhP 400,000, the table indicates the current tax at PhP 8,000 (2.00%) on top of the price. Under HB 4774, the will double to PhP 16,000 (4.00%). It means what was previously PhP 408,000 based on the current scheme will increase to PhP 416,000, representing a 2.0% increase pre-VAT.
At the PhP 1,100,000 mark the increases are more profound. Previously, the excise was PhP 112,000 (10.18%), but under HB 4774 that will increase to PhP 224,000 (20.36%), raising the original price from PhP 1,212,000 to PhP 1,324,000. The increase in this price point will be 9.2% pre-VAT.
As we move higher up the price ladder, the increases are far more dramatic. If the NMISP was PhP 1,500,000, the excise tax was plotted at PhP 272,000, bringing the post-excise tax price to PhP 1,772,000. The new scheme proposes raising the tax to PhP 624,000, thereby raising the price to PhP 2,124,000 which is 19.86% more pre-VAT.
At the PhP 1,800,000 mark the original tax schedule meant that the governent collects PhP 392,000 (21.77%), bringing the price to PhP 2,192,000. HB 4774 mandates that the excise tax be increased to PhP 924,000 (51.33%), more than double the original tax scheme and brings the price of the vehicle to PhP 2,724,000, representing a 24.27% increase in price pre-VAT.
In the luxury sector, the changes are outrageous. A manufacturer's net selling price of PhP 5,000,000 means that the tax collected is already at PhP 2,252,000, bringing the price to PhP 7,252,000. But under HB 4774, that means the price will increase to PhP 12,024,000 as the excise tax mandated will be at PhP 7,024,000.
It's very important to keep in mind that the prices do not factor in the 12% VAT and the dealer's profit margin. Our sources indicate that generally dealers mark up 20-40% on top of the NMISP after excise taxes and after the 12% VAT.