Hike on road user’s tax to reduce traffic???

It was more of irritation than disgust to learn about plans of the government to hike anew the road user’s tax. This feeling is especially more pronounced among people who bought a brand new vehicle more than three years ago but has up to now not been issued with car plate. But having no car plate is another issue altogether.

Yet, car dealers require buyers to pay three years of advanced vehicle registration fee to the Land Transportation Office (LTO). The proposed increase in road user’s tax is in the form of higher annual vehicle registration fees collected by the LTO from the owners of all motor vehicles, including motorcycles and trucks.

The road user’s tax is officially called motor vehicle user’s charge, or MVUC. It was imposed under Republic Act (RA) No. 8794 that was approved into law in the year 2000. RA 8794 mandated the doubling of annual vehicle registration fees over a four-year period. It was a 100 percent increase, amounting to tens of billions each year.

LTO registration fees vary, depending on the type and weight and age of vehicle. For privately owned, it currently ranges from a low of P2,000 for brand new light passenger cars to as high as P8,000 for new heavy passenger cars.  Sports utility vehicles (SUVs) which are the favorite vehicles of the rich and moneyed people are charged P2,300 for models 1991 and above. For motorcycles, registration fee is pegged at P240 but with sidecars, the registration is P300. Trucks and buses with 4,501 kilograms and above are charged P1,800 plus 0.24 in excess of gross weight.

The total collection for the MVUC is P166.18 billion since RA 8794 was implemented from 2001 to May 2018, according to official figures submitted to the Senate. According to the LTO, there were 11.6 million vehicles registered as of last year. It increased by 1.2 million from 10.4 million new vehicles registered in 2017.

Sheer volume of motor vehicles is the number one problem identified by the Metro Manila Development Authority (MMDA) among the major causes of daily traffic congestion along EDSA and the rest of clogged Metro Manila road networks.

What is ironic is the reported increase in the number of motor vehicles, including high-end cars – not to mention ”luxury” vehicles – despite higher excise taxes imposed under RA 10963. Otherwise called as the Tax Reform Inclusion and Acceleration, or TRAIN Law, it took effect starting January last year.

Aside from the proposed hike in MVUC, there is also another House Bill being drafted that proposes to impose higher excise tax on so-called “luxury” vehicles, especially imported ones. The House committee on ways and means is recommending an increase in the excise tax on luxury vehicles costing at least P5 million. It would cover mostly the more expensive vehicles like Toyota’s Land Cruiser that now sells for less than P5 million. The Land Cruiser, the favorite SUV of many lawmakers, has two variants – one with “full option” costing P4.8 million, and the “standard” unit with a price tag of P4.4 million. 

The Cruiser used to cost more than P5 million but its price went down noticeably following the imposition of higher excise tax under the controversial TRAIN law. In contrast, TRAIN Law increased levies on low and medium-priced cars. It was on the assumption that it would mean more tax collections from these vehicles because of the greater number of middle-income and low earners who buy the lower-end of these vehicles. Excise tax on pick-up trucks was removed from TRAIN Law because they are considered utility vehicles.

Under the same RA 8794, it also created the controversial Road Board to, among other things, administer the funds collected out of the MVUC. Thus, MVUC collections all went to the Road Board headed by the Secretary of Department of Public Works and Highways (DPWH).

This was the same Road Board that President Duterte himself once described as a “milking cow” of corrupt officials. The Road Board, as it turned out, served as an additional source of “pork barrel” funds for lawmakers. The alleged questionable use of MVUC was one of the issues raised by lawmakers who called for the abolition of the Road Board.

This prompted President Duterte to abolish the Road Board under RA 11239 he signed last March 8 this year. Henceforth, as mandated by RA 11239, all MVUC collections now go directly to the National Treasury under a special account in the General Fund to be earmarked solely for the construction, upgrading, repair and rehabilitation of roads, bridges and road drainage to be included in the annual national budget of the DPWH. 

The proposed hike in MVUC and higher excise tax on luxury vehicles were initiated in a bill being drafted by Albay Rep. Joey Salceda, according to the letter he sent to the economic managers of President Rodrigo Duterte. Salceda chairs the House committee on ways and means where all tax and tariff measures must emanate in Congress. In his letter, Salceda cited the proposed new tax measures have been discussed during the Aug. 5 meeting of House and Senate leaders with administration officials led by Executive Secretary Salvador Medialdea at Malacañang.

As of this writing, Salceda has yet to recommend how much increase in road user’s tax and excise levy would be recommended under the House bills. Fortunately perhaps, the proposed hike in MVUC and higher excise tax on “luxury” vehicles are not part of the Comprehensive Tax Reform Program (CTRP) being pushed by the economic managers of President Duterte. With the TRAIN Law already being implemented, the four remaining CTRP packages that were earlier submitted to the 18th Congress are now going through the legislative process.

Hence, it seems this proposed hike in MVUC is more than a tax measure.

It looks more of a remedial legislation to stave off the “carmaggedon” that erupts every now and then in our busy roads and thoroughfares. Our roads have already become virtual parking lots for all types of motor vehicles stuck together in traffic jams at any time of the day.

It is a long-haul measure that was needed yesterday.