Senate approves two-tier tax rate for cars

A car showroom of Toyota in Metro Manila (AFP FILE PHOTO)

The Senate voted 17-1 to approve the Tax Reform Acceleration and Inclusion (TRAIN) bill, with Sen. Risa Hontiveros being the lone dissenter. The TRAIN bill imposes a two-tier tax scheme on automobiles— 10 percent on price of cars valued up to P1 million and 20 percent for those valued over P1 million.

About 6.8 million of the country’s 7.5 million individual income taxpayers would be exempt from paying income taxes starting January, but most Filipinos would pay more for fuel, sweetened beverages and electricity under a tax bill the Senate approved on third and final reading on Tuesday night.

Sen. Sonny Angara, chair of the ways and means committee, said the measure was expected to generate P100 billion to P130 billion in revenue for the government.

Senate President Pro Tempore Ralph Recto said the tax bill would benefit 5 million people from the reduction in personal income tax, but “95 million will get hit with consumer taxes.”

“Minimum wage earners today are exempt (from paying income taxes) so they have no reduction (in income tax payment), but they will have to pay higher oil prices, higher electricity, higher sweetened beverage so on and so forth,” Recto told reporters.

Most affected would be the poor, socioeconomic Classes D and E, because of the consumption taxes, according to Recto.

Senate Minority Leader Franklin Drilon said the bill would face a “tough battle” when the bicameral conference committee reconciles the House and Senate versions next week.

Drilon expressed concern over the burden that the tax bill would impose on the people.

Excise tax on fuel and cars

On petroleum excise tax, the Senate imposed an excise tax of P1.75 a liter starting 2018, P2 in 2019 and P2.25 in 2020. Excluded from the tax was kerosene. The bill provides for a three-tier imposition of excise tax of P1.75 on fuel and bunker fuel on the first year, P2.00 on the second year and P2.25 on the third year. (The House version seeks to impose a P3 excise tax on the first year, P2 on the second year, and P1 on the third year.)

Computation made by Drilon showed that the excise tax on diesel would be P3.75 a liter in 2019 and P6 in 2020, which he said could “burden the poor even more.”

The Senate provided for a two-tier tax scheme for the automobile excise tax.

Automobiles selling for up to P1 million will have a tax rate of 10 percent and those selling for over P1 million, 20 percent.

After they approved their own versions of the measure, the two chambers will elect their contingent to the bicameral conference committee to reconcile their differences.

Once reconciled, the bicam will come up with a report that will be transmitted back to the two chambers for ratification before sending it to Malacanang for President Rodrigo Duterte’s signature.

Senate Minority Leader Franklin Drilon said the “real battle” would be in the bicam as he expects “tough and tedious” debates on the disagreeing provisions of the measure.

“The bicam could prove to be the real battleground for the passage of the TRAIN because there are numerous disagreeing provisions between the House of Representatives & Senate versions,” Drilon said in a statement issued before the chamber passed the measure.

“The bicam will be difficult. The TRAIN is headed into a tough battle in the bicam,” he added.

Drilon said among the contentious provisions of the measure are the proposed additional excise taxes on petroleum, minerals, coal, and cosmetic procedures.

Reconciling the very different proposals made by the House and the Senate on sugar and sweetened beverages, automobiles, value-added tax (VAT) zero rating and, lifting of VAT exemptions is also expected to be a very arduous task, he said. –Maila Ager, Christine O. Avendaño