March 18, 2018, 10:13 am
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Senate tweaks automobile tax

Senate has adopted a progressive version of excise tax system for automobiles where the lower-end models would only bear slight increases while the high end models will be taxed much higher.

Senate’s version is similar to that of House Bill 5636, a narrower band of five brackets instead of seven proposed by the automotive industry.

“This is to ensure affordable choices are still available for the growing middle class of the country,” said Sen. Sonny Angara, citing statistics of the Department of Finance which said 80 percent of Filipino households do not own cars.

The Senate ways and means committee on Wednesday submitted for plenary approval Senate Bill 1592, its own version of the Tax Reform for Acceleration and Inclusion (TRAIN). 

TRAIN was certified as urgent by President Duterte at Wednesday’s Legislative-Executive  Development Advisory Council meeting.

Under the bill, effective Jan. 1, 2018, vehicles with a net manufacturer’s price or importer’s selling price of up to P600,000 would be slapped 4 percent excise tax, double the rate of the current system of 2 percent but a percentage point higher than the 3 percent proposed by HB 5636.

Vehicles over P600,000 to P1.1 million will pay P24,000 plus 35 percent of excess of P600,000

The middle rung of the brackets, those priced at over P1.1 million to P2.1 million will be slapped a tax of P199,000 plus 55 percent of excess over P1.1 million.

Vehicles priced over P2.1 million to P3.1 million will however pay P749,000 plus 90 percent of excess over P2.1 million,.

The highest tax rate applies to vehicles costing over P3.1 million with a hefty tax of P1.649 million plus 100 percent of excess over P3.1 million.

The rate is  higher than what the House version proposes which is P1.468 million plus 90 percent of the value in excess of P3.1 million.

Yet this is drastically higher than the current tax system which pegs the highest tax rate on vehicles costing over P2.1 million with P512,000 plus 60 percent of the value in excess of P2.1 million.

Angara, chairman of Senate ways and means committee, said under this scheme, the price of a Toyota Vios will approximately increase by P20,000 from P812,000 to P832,000) while a BMW X5 30d will increase by P3.2 million from P6.6 million to P9.8 million.

Angara said he is a believer of the vision of former Bogota, Colombia Mayor Gustavo Petro that “developed country is not a place where the poor have cars. It’s where the rich use public transportation.”

This is why Angara’s committee hopes revenues from the new taxes on automobiles will be earmarked to efficient public transportation.

Angara said car sales have consistently gone up in the past few years, hitting an all-time high of 413,700 units in 2016 and a 24-percent growth from 2015.

“But while more started purchasing new cars, road networks and mass transportation did not necessarily improve or expand in tandem. This may be one of the reasons so many suffer through congested roads every day,” said Angara in his sponsorship speech.

“Hopefully, with the proposed auto excise taxes, we will see the day when the many Filipinos who rely on public transportation move around more comfortably in modern buses and jeepneys, in trains that do not breakdown,” Angara added.

The Senate version also encourages greener and cleaner transportation options, by exempting hybrid and electric cars from the tax.

Under the same bill, Senate excluded three-in-one coffee mixes, milk and 100 percent natural fruit and vegetable juices, unsweetened tea, meal replacement and medically indicated beverages under the proposed sugar-sweetened beverage tax component of TRAIN.

The bill also lowered the proposed excise tax rate of P10 per liter to P5per liter.

The Senate accepted the proposal of the executive branch to impose P6 per liter excise tax on gasoline and diesel but it will be into P1.75, P2 and P2.25 in three years.

Angara also excluded kerosene and reduced rates for liquefied petroleum gas  in the proposed petroleum excise tax.
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