House scales down proposed tax increase on cars

MANILA, Philippines - The House of Representatives has reduced the proposed increase in the tax on cars and other vehicles to lessen the impact of the adjustment on car buyers.

At the same time, the House spread the increase over two years – 2018 and 2019.

Under the bill congressmen have approved on third and final reading, the tax hike would be a maximum of 100 percent. 

The bill the Department of Finance (DOF) originally proposed and adopted by Quirino Rep. Dakila Cua, ways and means committee chairman, pegged the maximum increase at more than 300 percent.

The approved bill shows that cars costing up to P600,000 would have a tax of three percent starting Jan. 1, 2018 and four percent in 2019, up from the present two percent, or a 100-percent increase.

Those priced at over P600,000 up to P1.1 million would have a tax of P18,000 plus 30 percent of the excess over P600,000 in 2018, and P24,000 plus 40 percent of the excess in 2019. The present levies are P12,000 plus 20 percent.

Cars selling for over P1.1 million up to P2.1 million would be taxed P168,000 plus 50 percent of the amount exceeding P1.1 million in 2018, and P224,000 plus 60 percent of the excess in 2019. The current rates are P112,000 plus 40 percent.

Those priced at over P2.1 million up to P3.1 million would have a levy of P668,000 plus 80 percent of the excess of P2.1 million in 2018, and P824,000 plus 100 percent of the excess in 2019. The current rates are P512,000 plus 60 percent.

The House added a new price range: those selling for over P3.1 million. These would be taxed P1.468 million plus 90 percent of the excess over P3.1 million in 2018, and P1.824 million plus 120 percent of the excess in 2019.

The proposed rates under the original DOF-Cua bill were four percent for cars costing up to P600,000, P24,000 plus 40 percent for those priced at over P600,000 up to P1.1 million, P224,000 plus 100 percent for those selling for over P1.1 million up to P2.1 million, and P1.224 million plus 200 percent for those priced at more than P2.1 million.

Thus, while the proposed tax adjustments for cars costing up to P1.1 million or those for the mass market were kept at 100 percent, the rates for higher-priced vehicles were substantially reduced.

For instance, a sport utility vehicle priced at P2.1 million would be levied P1.224 million plus 200 percent of the excess of P2.1 million under the original bill.

The new rates in the approved measure are P668,000 plus 80 percent in 2018 and P824,000 plus 100 percent in 2019.

The bill defines an automobile as “any four- or more-wheeled motor vehicle, regardless of seating capacity, which is propelled by gasoline, diesel or any other motive power except (those) purely powered by electricity.”

The definition does not include “buses, trucks, cargo vans, jeeps/jeepneys/jeepney substitutes, single cab chassis and special purpose vehicles.”

Special purpose vehicles are vehicles designed for specific applications, like cement mixers, fire trucks and ambulances. They also include off-road vehicles for recreational activities.