NTRC study shows Philippine auto excise tax lowest in Asean

By Prinz Magtulis (The Philippine Star), December 4, 2016

“The Philippines imposes the lowest minimum rate of two percent on taxable motor vehicles compared with five or 10 percent in minimum tax rate in other member countries,” the state-led National Tax Research Center (NTRC) said.

MANILA, Philippines – Automobile excise tax is the lowest in the country across Southeast Asia and covers the least number of vehicles, justifying government reform plans that seek to discourage car purchases to ease traffic in Metro Manila.

“The Philippines imposes the lowest minimum rate of two percent on taxable motor vehicles compared with five or 10 percent in minimum tax rate in other member countries,” the state-led National Tax Research Center (NTRC) said.

The findings were included in the study, “Comparative Excise Taxation of Motor Vehicles in ASEAN Countries,” published on the NTRC Tax Research Journal in October.

Aside from low levies, the country’s vehicle taxes also exclude the most vehicles versus eight of the nine other members of Association of Southeast Asian Nation (ASEAN), except Thailand.

Under the law, NTRC said the term “automobiles” refer to four or more wheeled vehicles run by oil or electricity, excluding motorbikes.

Specific exemptions were also given to public utility vehicles such as jeepneys and buses as well as trucks, cargo vans, single cab and special purpose vehicles.

“While the Philippines does not subject buses and trucks to the excise tax, Lao PDR and Myanmar include them in the coverage of their respective excise tax structure. Singapore also subjects buses to the tax,” NTRC said.

“While the Philippines does not tax special purpose vehicles, Brunei, Indonesia and Singapore impose the excise tax on these,” it added.

Rommel Gutierrez, president of the Chamber of Automotive Manufacturers of the Philippines (CAMPI), declined to comment yesterday.

He, however, said the group was “studying carefully” the proposal of the Department of Finance to increase vehicle levies under one of the five packages of the comprehensive tax reform program.

In a statement Tuesday, the DOF said it was pushing to lift the minimum tax to five from two percent for vehicles priced P600,000 and below.

At the higher end, luxury cars worth over P2.1 million will have a fixed tax of 60 percent, which is currently imposed on the excess of that amount.

The NTRC said even this structure of marginal tax on excess amounts depending on seller’s price is unique for the Philippines, with other ASEAN countries charging a fixed rate based on the vehicle price.

For instance, Brunei and Singapore charge a 20-percent “standard rate,” while the latter levies motorcycles 12 percent.

Myanmar has a two-tiered fixed rate of five and 25 percent, depending on the automobile type, while Cambodia uses three at 10, 20 and 30 percent.

Thailand, meanwhile, considers vehicle carbon emissions to charge taxes between five and 50 percent, NTRC said.

Finance Secretary Carlos Dominguez said the government’s goal is to increase taxes by 2018 to lower vehicle sales, which grew 24.5 percent in the first 10 months based on data from CAMPI.

To compare, the construction sector, which includes building of roads and bridges to absorb cars, only expanded 13.2 percent as of the end of September.

“What’s the point of buying a new car and not moving in the streets? That point of the matter is we want to direct the people to go to public transport, and we are making big investments in public transport…,” Dominguez said.