DTI Rejects Car Industry’s Tax Hike Counterproposal

In an attempt to convince the Department of Trade and Industry (DTI) to lower the tax rate and ceiling on the impending tax hike set to be implemented in 2018, car brands, dealerships and associations banded together and came up with a counterproposal that justifies their stand.

According to the Association of Vehicle Importers and Distributors (AVID) and the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI), the proposed automotive excise tax increase is “too heavy” for the local automotive industry to bear. The groups combined to make a joint position paper on House Bill 4774.

However, DTI Secretary Ramon M. Lopez said he will not support the groups’ call to lower the tax rate and ceiling on the proposed hike, stating that they have made too many compromises as is.

Lopez added that the rate deduction asked for by the automotive chambers consisted of a negligible difference.

The contents of the joint paper

“We support HB 4774 to improve tax collection and generate needed revenues,” the joint paper began. “However, we raise serious concerns about (the) short- to long-term risks the proposed tax legislation poses to the automotive industry,” it continued.

The paper added that the industry stands to “suffer significant market loss due to the corresponding progressive increases in the prices of automobiles.” It also mentioned that the groups may be compelled to “pass on to or share (such burden) to the consumers.”

The joint paper suggested lowering the tax from three percent to two percent. Lopez said that a one-percent difference was minimal and the argument insufficient such as to affect the ultimate goal of the tax reform program initiated by the Duterte administration.

Additional requests

The joint paper also mentioned expanding the price brackets indicated in the bill from four to seven. The brackets allow for a tax ceiling that depended on the car’s category. Lopez called the proposed adjustment immaterial.

As well, the paper also included a request for a six-month lead time before the government implements its new tax rates. The groups behind the paper also sought to exclude coverage for alternative fuel, electric, and hybrid vehicles.

House Bill 4774 already modified

Lopez said that the current version of HB 4774 is already modified and optimized . He adds that he already opposed an earlier version of the bill and requested the alteration of certain provisions. According to Lopez, the earlier version that the Department of Finance (DOF) submitted to Congress last year had a potentially negative impact on the output of the government’s Comprehensive Automotive Resurgence Strategy (CARS) program. The CARS program is an initiative meant to boost the local car manufacturing sector.

DTI made adjustments to the bill after the rejection, and Lopez said the DOF and DTI were now ‘in sync,’ pertaining to the goals of both governmental departments for the bill.