A non-government coalition advocating tax and fiscal reforms has expressed its full support for the proposed adjustments in automobile excise taxes as a way to help raise revenues that would fund the improvements in the country’s mass transport system.
Jo-Ann Diosana of the Action for Economic Reforms (AER) has told lawmakers that the proposed increases in the automobile excise tax under the Comprehensive Tax Reform Program (CTRP) of the Department of Finance (DOF) is both a “highly progressive” and pro-commuter measure that would, to some extent, help ease the worsening traffic crisis in major urban centers.
“On the automobile excise tax, in principle, AER supports this excise tax reform,” Diosana said at a hearing on the CTRP by the House ways and means committee.
But she said the reforms in automobile excise taxes “should not negate the government’s Automotive Resurgence Strategy (CARS) Program” that aims to develop the country as a regional manufacturing hub for motor vehicles.
“First, the excise tax on automobiles is a highly progressive tax. We believe that having cars is a luxury, but public transportation is a right,” Diosana said, reading from the AER’s position paper on the issue.
The AER has earlier expressed its support for the DOF-proposed tax reform program, which it described as a potential “game changer” that aims not only to generate revenues but also enable the government to finally address the country’s infrastructure backlog and invest heavily in human capital formation.
“What better way to finance our mass transit system plans than collecting from those who have more capacity to contribute to building our nation’s transport system?” she added.
Diosana pointed out that although the automobile excise tax would not discourage people from buying new cars, given the corresponding increase in their take-home pay resulting from the personal income tax cuts under the CTRP, they would at least think twice before buying a second or third car.
The first package of the DOF-proposed CTRP is contained in House Bill No. 4774 that was filed last January by Rep Dakila Carlo Cua, who chairs the ways and means committee.
HB 4774 consists of a significant reduction in personal income tax (PIT) rates plus a corresponding set of revenue-compensating measures, which include lowering the rates for estate and donor’s taxes, expanding the value-added tax (VAT) base but retaining exemptions for senior citizens and persons with disabilities, and adjusting automobile and fuel excise taxes.
The Chamber of Automotive Manufacturers of the Philippines (CAMPI) and the Association of Vehicle Importers and Distributors (AVID), in a joint statement read before the committee by AVID chair and president Maria Fe Agudo Perez, said that they likewise support HB 4774 to enable the government to raise enough revenues for its priority programs.
Agudo Perez also presented the joint recommendations of CAMPI and AVID on how to mitigate the impact of the automobile excise tax adjustments on the local car industry, such as increasing the tax tiers from four to seven and providing them a six-month grace period from the implementation of the new tax rates.
Earlier, Finance Secretary Carlos Dominguez III said the local automotive industry will continue its “healthy” growth rate even with the proposed adjustments in car excise taxes, given that the manageable price hikes in mass-market vehicles would be readily absorbed by buyers who will, in effect, increase their take-home pay by way of substantially lower personal income taxes.
He said buyers would also hardly feel the effects of the price adjustments for mass-market cars such as the Toyota Vios and the Mitsubishi Mirage from the proposed excise tax increase because of the flexible financing schemes offered by car dealers that stretches to as long as seven years for some models, which will become even more affordable amid the country’s low interest-rate regime.
While there may be an initial slowdown in car sales, Dominguez said the industry would be able to quickly recover and continue its robust pace of growth as it did in the past two years, when car sales went up by 25 percent.
Middle-income taxpayers, or those earning between P21,000 and P60,000 a month, will get tax relief ranging from P21,800 to P48,000 per year based on DOF computations.
DOF computations also show that the government stands to gain some P31.4 billion in additional revenues from the automobile excise tax adjustments, according to Finance Undersecretary Karl Kendrick Chua.
Chua pointed out at the House hearing that while a Mitsubishi Mirage would be taxed an additional P12,000, the average car buyer could still afford to purchase this car model because of tax relief of some P20,000 a year under the DOF tax reform plan.
Based on data from the Land Transportation Franchising and Regulatory Board, car registration continues to grow despite very high oil prices.
In 2011, oil prices rose by around 40 percent yet total car registrations grew by around 8 percent and new registrations increased by 13 percent.
Chua said incremental revenues from the higher car excises, which have not been adjusted for the last 13 years, will be softly earmarked to improve traffic management solutions and fund climate change-resilient infrastructure.
Dominguez stressed that tax reform is indispensable to the government’s goal of investing some P1 trillion more each year on top of the current P1.3 trillion it plans to spend on infrastructure, education, health, social protection, and other programs necessary to create enough decent-paying jobs for, and improve the living standards of, Filipinos and at the same time make the Philippines more globally competitive and attractive to foreign investments.
“The general rule in crafting the Duterte administration’s income tax reform plan is that the rich will have to pay more while poor and low-income Filipinos will pay less or none at all,” he said.
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