Sunday, May 7, 2017

UPDATED: How the Approved Excise Tax Bill Affects 20 Popular Vehicles

UPDATE 1: House Bill 5636 or The Tax Reform for Acceleration and Inclusion (TRAIN) aka the excise tax law has now passed the House of Representatives on its third reading. It now moves to the Senate (6/1).

A few days ago, several media outlets including The Philippine STAR reported that The House Committee on Ways and Means has just approved the tax reform package proposed by the Department of Finance. Included in this tax reform package is a revision to the current new vehicle excise tax which car buyers have been enjoying for the good part of a decade.

Top Gear Philippines has managed to obtain a copy of the bill approved at the committee level, particularly the portion pertaining to the revised new vehicle excise tax. The approved bill (which is slated for another hearing yet again), differs from the original proposal in that it has a two-stage increase, the initial of which begins on January 1, 2018.

It is summarized as follows:

Net Manufacturer's Selling Price / Importer's Price Excise Tax Effective January 1, 2018 Excise Tax Effective January 1, 2019
Up to P 600,000 3% 4%
P 600,000 to P 1,100,000 P 18,000 + 30% of value in excess of P 600,000 P 24,000 + 40% of value in excess of P 600,000
P 1,100,000 to 2,100,000 P 168,000 + 50% of value in excess of P 1,100,000 P 224,000 + 60% of value in excess of P 1,100,000
P 2,100,000 to 3,100,000 P 668,000 + 80% of value in excess of P 2,100,000 P 824,000 + 100% of value in excess of P 2,100,000
Above P 3,100,000 P 1,468,000 + 90% of value in excess of P 3,100,000 P 1,824,000 + 120% of value in excess of P 3,100,000

But what does this all mean for vehicle prices? Like we did before with the original Department of Finance proposal and the one in House Bill 4774, we can compute the new Suggested Retail Price or SRP of these vehicles.

Assuming all factors aside from the excise tax remains constant, it’s easy to determine what the new selling price of vehicles would be. The base is the net manufacturer’s price which is landed cost + importation duties + tariffs (if it’s built in the Philippines, then it’s Cost of Goods Sold or COGS). Carmakers then tack on the excise tax before putting their profit margin. In this case, the assumption is 15 percent split between the carmakers and its dealers (the global industry rates floats wholesale margin as 8 to 14 percent and dealer margin as 7 to 10 percent). Finally, Value Added Tax or VAT of 12 percent is computed based on the total of the margin + excise tax + net manufacturer’s price.

Based on the two-tier implementation of the new vehicle excise tax, this is how it will affect the SRP based on the brackets (click the image for larger preview, or right click and Save As to download):

Putting things into even clearer perspective, this is how it will affect vehicle pricing based on a sampling of 20 vehicles in the country across different price ranges:

The effect on SRP varies greatly depending on which bracket the vehicle finds itself in. For example, the Hyundai Eon sees an increase of P 4,980 in 2018 and P 9,961 in 2019; while the Toyota Vios goes up by P 18,623 in 2018 and a whopping P 37,247 in 2019. Even more shocking would be the Honda Civic RS Turbo and the Mazda3 Speed which sees an increase of P 58,957 and P 58,540 respectively in 2018 and P 117,913 and P 117,080 respectively in 2019. Going for more luxurious choices like the BMW X1 xDrive20d xLINE means having to shell out P 199,195 more in taxes in 2018 and P 398,391 in 2019.

With the implementation of the new vehicle excise tax moving up a notch, is it a good idea to “panic buy” a brand new car? Not necessarily. For this to be enacted into law, it will still have to pass through Congress at the plenary level. Plus, the Senate can also draft a version of the tax reform package, modifying or completing changing what Congress has put forth.

Likely, the Senate and Congress arm wrestling match will take the whole year, so you have at least until that time to get that brand-new car.

Sources: The Philippine STAR, Top Gear Philippines


  1. This is BS! This will not decrease the number of vehicles on the road, this will force car buyers for example someone planning to buy an Altis will be forced to buy a Vios instead. This will decrease the quality of life of Filipinos who should've bought and experienced a better and decent car as opposed to a budget economic. The roads will be swarming with Eons and Wigos in 2020.

    1. Chances are there will still be a lot of Vioses and EcoSports sold after the price increase.

    2. I believe that it is not intended to decrease the number of vehicles on the road. It is rather more on the collecting of taxes.

  2. As much as I disagree with this bill, including the fuel excise tax, I'm a bit surprised that the increase on SRP isn't too massive. Where it would sting for the average consumer is the additional thousands of pesos on top of their monthly payments. Not to mention the fuel price hike that this bill includes.

    If only the government can wipeout corruption and kickbacks for a more efficient tax collection like the president promised, then they would not need to file such bill in the first place.

    1. that's easier said than done especially if you have corrupt officials like Trillanes, other LP members who are elected leaders and other low-level corrupt officials from barangay officials, to mayors, to governors and even "Representatives" who used to and are still running some parts of the country that steal from public funds and grossly OVERPRICE their projects and even haggle with 3rd party contractors where the money they "saved" from the project would go into their pockets for their oh so materialistic wife/wives/mistresses, spoiled brat kids, their tummies that are ever-expanding like the universe and their addictions/collections like car collections *cough*(TESDA chief Boboy Syjuco a.k.a. 1st Official owner of a GT-R in the Philippines)*cough*

      You can't blame the president if some of his promises aren't fully realized. You can blame most part on other officials *cough*(LP Party, Supreme Court, Court of Appeals, some A-hole cops, CPP-NPA, MEDIA, Drug Lords, Drug protectors, CHR, De Lima)*cough* for disturbing the flow of change, creating chaos, not wanting to change because change and good governance won't benefit their "family" and bellies because they still want to eat 5-star food at 5-star restaurants everyday and to buy iPhones for their family.

    2. Yeah, right. Blaming LP when in fact it is Du30 who wanted to add the fuel taxes for gasoline and diesel by a whooping php5 per liter (at least). As if increasing the excise tax of automobiles isn't enough. It is fund raising time for this gov't.

  3. Thanks a lot for really help so much po.easy for us to understand in laymans term

  4. Change has come, and.....I don't like it.

    1. actually, our brains were designed not to accept changes. but when you realize the change is good for all not only to you, you will appreciate it.

    2. yes. i agree with you. but if the it is for the good and benefits of only few, i strongly disagree. we do not know yet the real purpose of this(maybe, maybe there is a hidden agenda for this). let's wait and see after few years of implementation of this.

  5. Replies
    1. ^^ Do you even know the repercussions of this Tax Reform Bill as a whole to call me idiot? You need some iodine to understand. Stupid prick.

  6. Before they start talking about these taxes, I think the government should prove that public transport is comfortable, efficient, safe and reliable. Then if people are convinced then there's no need to buy a private vehicle.

    But I guess what they're trying to innovate is on how to milk more money from us - in this case they should prove that every single penny is spent on public welfare.

    On another note, we're Pinoys and we excel at workarounds and palusot, so I can't wait to read about the ways they can think of to circumvent this one.

  7. Hi Ulysses, can you pls show the net results for 2018 and 2019 for a car worth 15M? Thanks!

  8. I must be ignorant or didn't really understand the explanation because my computations are way high. I have the following based on their summary:
    750k vehicle will in Jan 1, 2018 cost 813K
    a 900k vehicle will cost 1,008,000.00
    and a P1.2M vehicle will cost 1.418M

    1. What is your methodology for your computation?

    2. I think he computed it this way..

      SRP 750k

      600k x 3% =18,000 + 30% excess of 600k (150k x 30%) = 45k

      18,000 + 45,000 = 63,000

      750,000 + 63,000 = 813,000


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