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Senate approves tax reform bill, new excise taxes on cars

Senate approves tax reform bill, new excise taxes on cars image

AutoIndustriya.com / AutoIndustriya.com | September 23, 2017 10:27

Higher rates for car excise taxes proposed by Senate

It seems the price increase for vehicles from the revised excise tax is closer to becoming a reality.

The Senate Ways and Means committee has recently approved Senate Bill No. 1592; effectively a major piece of legislation that seeks to overhaul the country's tax system. There are, however, some differences between the Bill signed off by the House and the proposal of the Department of Finance (DoF). Like House Bill No. 5636 (Tax Reform for Acceleration and Inclusion – TRAIN) that was approved last May 2017, the vehicle excise tax under the new Senate Bill will consist of five stages.

It will however only be implemented in a single phase; instead of the two-phase increase proposed by Congress. A provision for adjustment based on fluctuation of the Peso/Dollar exchange rate is included, however.

Congress version based on House Bill 5636 below:

Congress Excise Tax

Also different are the rates; under HB 5636, the proposed excise tax is only at 3-percent for vehicles with an NMISP (Net Manufacturer's/Importer's Selling Price) at PhP 600,000 or less, but SB 1592 proposes excise at 4-percent. This means that the Senate's version of the proposed excise tax for vehicles will have a slightly more significant effect on cars right away compared to House Bill No 5636.

It seems to impose less taxes on vehicles priced above PhP 600,000 in the long run with its simplified single-phase scheme.

The rates of the Senate proposal, effective January 1, 2018, are as listed below.

Last month, the DoF released estimated suggested retail prices of vehicles with their computations. The government agency's proposal was computed using the manufacturer's net price plus the excise tax and value added tax. Heavier taxes will be levied on luxury vehicles due to the progressive structuring of their proposal. Like the House and Senate Bills, the DoF plans to further increase the excise tax on vehicles.

There are, however, certain vehicle classes that are not included in the increase in excise taxes under the bill such as electric vehicles (EV) as well as hybrids (gas-electric and diesel-electric). Six years ago, the Senate also approved the bill for the Electric, Hybrid and Other Alternative Fuel Incentives Act of 2011, though it didn't pass into a law.

Also exempted from the tax reform bill are single cab chassis, buses, trucks, cargo vans, jeepneys/jeepney substitutes and special-purpose vehicles.

As both lower house and upper house versions are different, the numbers above are not final. They will convene in a bicameral session to iron out the differences before a final version is presented to President Rodrigo Duterte for enactment into law.