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Senate’s Simpler Two-Tier Vehicle Excise Tax Will Make Luxury and Sports Cars Cost Slightly Less

The senate version's flatter tax will make mainstream cars cost slightly more, while luxury and sportscars will cost slightly less.

According to GMA News, the Senate approved on its third and final reading another revised version of the TRAIN (Tax Reform for Acceleration and Inclusion). Voting 17-1, with Risa Hontiveros being solely opposed to the measure.

Senator Ralph Recto proposed the amendment to the vehicle excise tax, citing that the excise tax is “too high”, and therefore proposed a simple two-tier scheme.

Wanna know how simple the new structure is? Under the Senate version, cars with a net manufacturing price of P1 million and below will have a 10% fixed tax while those that cost more than P1 million will have a 20% fixed tax. This effectively only creates 2 tiers, which is substantially simpler than the Department of Finance’s version, as shown below.

Ralph Recto’s reason on why he proposed this is because “Pag masyadong mataas ‘yung rate what happens? May smuggling.”

Now, this is where it gets interesting. Since the tax to cars P1 million and above is constantly at 20% and is based on a car’s manufacturing cost, cars costing around P1 million to P2 million will see an increase, while as the car’s price climbs up, the tax becomes lesser and lesser, due to the 20% tax being constantly flat and not increasing as the price increases, eventually leading to more expensive cars actually costing less than they currently are. The current system and the DOF’s proposed system (as shown above) increases the tax as the car’s price increases, while in the Senate’s latest version, the car’s tax actually decreases as the car’s price climbs up.

Just exactly how much less? Here’s an interesting computation from CarGuide.PH. Estimates and assumptions were made, including the car manufacturer’s profit margins, so this does not mean this will be their exact prices in 2018. Notice how as you climb higher in the price chain, the tax levied to the car becomes less and less.

  1. Suzuki Alto 800 MT
    Current SRP: P398,000
    September 2017 Version: P405,804
    Final Senate Version: P429,216
    Difference: +P31,216
  2. Toyota Vios 1.5 G AT
    Current SRP: P925,000
    September 2017 Version: P955,299
    Final Senate Version: P973,595
    Difference: +P48,595
  3. Honda Civic 1.8 E
    Current SRP: P1,115,000
    September 2017 Version: P1,171,299
    Final Senate Version: P1,149,595
    Difference: +P34,595
  4. Mazda 3 2.0 Speed Hatchback
    Current SRP: P1,398,000
    September 2017 Version: P1,489,674
    Final Senate Version: P1,409,012
    Difference: +P11,012
  5. Ford Everest 2.2 Titanium (Non-Premium) 2WD
    Current SRP: P1,839,000
    September 2017 Version: P1,980,936
    Final Senate Version: P1,938,398
    Difference: +P99,398
  6. BMW X1 xDrive20d xLine
    Current SRP: P3,340,000
    September 2017 Version: P3,642,657
    Final Senate Version: P3,224,969
    Difference: -P115,031
  7. Toyota Land Cruiser LC200 Premium
    Current SRP: P4,930,000
    September 2017 Version: P5,528,833
    Final Senate Version: P4,420,068
    Difference: -P509,932

The Department of Finance has set a December 11 deadline to have President Duterte sign TRAIN into law, with implementation targeted for January 1, 2018. According to Rappler’s interview with Senate Minority Leader Franklin Drilon, he “expects a difficult time at the bicameral conference committee due to the polarizing provisions in the Senate and House versions.” The bicameral conference is scheduled to happen today, November 30, 2017.

In the end, let’s just hope for the best between the consumers, and the country, and whatever version of the TRAIN becomes signed into law, we hope it’s for the best of both the country and its people.

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