Excise tax blues: Industry insider scorches opportunistic sales gimmicks

The proposed House Bill (HB) No. 4774, the “Tax Reform for Acceleration and Inclusion Act,” is now pending in Congress. Once approved, the bill will be transmitted to the Senate.

If it passes both houses and is enacted into law, this will tax the production, sale or consumption of certain commodities.

According to the Bureau of Internal Revenue’s tax information system, the applicability of the excise tax is on goods manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition, and on imported goods.

The types of excise tax are specific tax, which refers to the excise tax based on weight or volume capacity or any other physical unit of measurement, and the ad valorem tax, which is based on selling price or other specified value of the goods/articles.
The manner of computation for specific tax is number of units/other measurements multiplied by the specific tax rate; while the ad valorem tax is the number of units/other measurements multiplied by the selling price of any specific value per unit multiplied by the ad valorem tax rate.

The major classification of excisable articles and related codal section include the “Miscellaneous Articles (Section 149-150)” which mentions automobiles (Section 149).

The Department of Finance posted on its website on Jan. 23 that a House bill would pave the way to a “progressive,” pro-poor tax system.

Furthermore, automobiles would be “part of the tax reform package,” and the excise taxes would be adjusted from 2 percent to 4 percent for cars with a net manufacturing or import price of up to P600,000.

Vehicles priced above P600,000 will be taxed higher, with those over P2.1 million charged P1.224 million plus 200 percent in excess of P2.1 million.

Separate bills will index the motor vehicle user’s fee to the cumulative inflation rate from 2004 to 2017, reflecting a 82-percent increase.

An auto industry insider, who refused to be named, said that the sales bait or gimmick of some car dealers posting promos such as “buy now before excise tax is implemented” are “not necessary,” and that “car distributors do not recommend this.”

Many industry observers believe that the proposed bill will not see the light of day because the congressmen and senators themselves—big-time car buyers that they are—would be affected.

The industry insider opined, “we respect the wisdom and proper disposition of the Senate as a whole.

The excise tax proposal cuts across all vehicle segments, even affecting first-time or entry-level buyers, the source said.

When asked if excise taxes could help lessen traffic woes, the insider said, “Traffic is not just about cars. Discipline is the key to help address traffic problems.”

Asked if excise taxes need to be shouldered by the buyer, and not the dealer or manufacturer, the insider replied that excise taxes are a component of the car’s selling price, and that car distributors are already shouldering different kinds of taxes.”

The source also shared that excise taxes are also implemented in one form or another in Asean or other Asian countries. “This is a form of domestic tax, and the bases or schemes for it may differ.”

Finally, the insider disclosed that the finance department did not consult the Chamber of Automotive Manufacturers of the Philippines and the Association of Vehicle Importers and Distributors about the proposed excise taxes.