Tuesday, November 28, 2017

Senate Passes New Vehicle Excise Tax on Third and Final Reading; It Makes Luxury Cars More Affordable


The Rappler reports that The Philippine Senate has approved on the third and final reading the proposed Tax Reform for Acceleration and Inclusion or TRAIN Bill which reduces the personal income tax but raises the excise tax on items such as new car purchases and fuel.

Voting 17-1, with Senator Risa Hontiveros opposing, Senate Bill 1592 has been passed. Now that the Senate has come up with their final version, it will now head to a bicameral conference committee with the House of Representatives in order to come up with a “combined version.”

The Senate version of the TRAIN Bill sees a much simpler excise tax levied on new vehicles. Under the finalized Senate version, vehicles with a Net Manufacturing Price of P 1 Million (P 1,000,000) will be taxed 10 percent while those costing more than P 1 Million (P 1,000,000) will be taxed 20 percent. This is a far cry from the proposed five-tier, two-phase implementation.

Hybrid and electric vehicles are exempted  from taxation.

Illustrating the difference of 7 vehicles under the current excise tax structure, original Senate version, and final Senate version, the effect of the finalized Senate bill is made clearer when comparing the current SRP and the Final Senate version SRP (note: all prices are estimates and based on the same assumptions as before):
  • Suzuki Alto 800
    Current SRP: P 398,000
    September 2017 Version: ~ P 405,804
    Final Senate Version: ~ P 429,216
    Difference: + P 31,216
  • Toyota Vios 1.5 G
    Current SRP: P 925,000
    September 2017 Version: ~ P 955,299
    Final Senate Version: ~ P 973,595
    Difference: + P 48,595
  • Honda Civic 1.8 E
    Current SRP: P 1,115,000
    September 2017 Version: ~ P 1,171,299
    Final Senate Version: ~ P 1,149,595
    Difference: + P 34,595
  • Mazda3 2.0 Speed Hatchback
    Current SRP: P 1,398,000
    September 2017 Version: ~ P 1,489,674
    Final Senate Version: ~ P 1,409,012
    Difference: + P 11,012
  • Ford Everest 2.2 Titanium 2WD
    Current SRP: P 1,839,000
    September 2017 Version: ~ P 1,980,936
    Final Senate Version: ~ P 1,938,398
    Difference: + P 99,398
  • BMW X1 xDrive 20d xLine
    Current SRP: P 3,340,000
    September 2017 Version: ~ P 3,642,657
    Final Senate Version: ~ P 3,224,969
    Difference: - P 115,031
  • Toyota Land Cruiser LC200 Premium
    Current SRP: P 4,930,000
    September 2017 Version: ~ P 5,528,833
    Final Senate Version: ~ P 4,420,068
    Difference: - P 509,932
For reference, in the current excise tax structure, a vehicle with a net manufacturer selling price of P 2,100,000 is taxed a rate of P 512,000 and 60 percent of any amount in excess of P 2,100,000.

In addition to increasing the excise tax on new vehicles, the TRAIN also levies an increase in tax for petroleum products. That said, the rates are lower than that of the House.

The approved Senate version sees diesel with a P 1.75 per liter tax in 2018, P 2.00 in 2019, and P 2.25 in 2020. LPG gets a P 1.00 per liter in tax while kerosene is excluded. No word in the Rappler report if the final Senate version changed the proposed levy on gasoline. If there’s no change, it will be P 6.00 in 2018, P 8.00 in 2019, and P 10.00 in 2020.

Although the Department of Finance set a December 11 deadline to have Duterte sign the TRAIN into law (the target implementation date is January 1, 2018), in an interview with Rappler, Senate Minority Leader Franklin Drilon says he “expects a difficult time at the bicameral conference committee due to the polarizing provisions in the two versions.” The bicameral conference is slated for November 30.

More on this as it develops.

Source: Rappler

58 comments:

  1. Not that much of a difference for cars costing 1.5m and below. Let's all hope that this won't push through. It really won't make a big difference if there's still widespread corruption.

    It'll trigger the higher prices of commodities and business overhead (electricity in particular). This will further drive away more foreign investors leaving and avoiding our country. Poor Juan Dela Cruz.

    ReplyDelete
  2. I think final senate version price for the X1 and LC200 is wrong. It will be cheaper than the current SRP?

    ReplyDelete
    Replies
    1. Based on the Rappler report, yes, more expensive cars will be cheaper under the final senate bill.

      I was surprised with the figures as well. A more expensive car like a Ferrari or Lamborghini can be cheaper than P 5 million under this tax system.

      Delete
  3. Fair enough, especially the ruling on hybrid and electric cars. I just hope infra projects for transport ends up as beneficiary.

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  4. Is SRP the same with Manufacturing Price?

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    Replies
    1. No. It's. Not. Check the links in the article.

      But basically...

      The new Suggested Retail Price of SRP must be computed. To arrive there, it’s important to nail down the net manufacturer’s price + excise tax + margin + VAT.

      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.

      Delete
    2. Thanks for the Info Mr. Uly. Well Looks like I should have waited haha! Cars with a price tag of 1.5m and below did not have much of an increase. But anyways I needed a new car too since I'll be selling my previous car. I wonder why the Price increase of a C-segment car like the Honda civic 1.8 and the Mazda 3 Speed is lower than the price increase of the vios? Back then as I recall it used to be the more expensive the vehicle the higher the price increase.

      Delete
  5. Wow,almost everybody thinks that luxury cars will most likely be affected by the new tax ... now its more cheaper! And the ordinary citizen will be affected ...

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  6. I can't help chuckling at these article. Could it be that the Senate is populated by clowns, thieves and wannabes? Actors, comedians, a boxer and impostors ( look at Bam, trying to hard to look Ninoy ) they probably need math lessons more than we do. Now you know.

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    Replies
    1. It IS populated clowns, thieves and wannabes. Bam is a credit-grabber and is as idiot as Panot.

      Delete
  7. ...this article

    ....(...too hard to look like Ninoy ) They...


    Mr. Uli maybe you should enable this site to let commenters correct whatever they posted already.

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  8. So increase the prices of mainstream cars for the low-middle class citizens, and decrease the prices of luxury cars for the rich. Nice.

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  9. If the purpose of the tax is to decrease the volume of new cars, they can actually tax every car the same across the board so everyone is affected.

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    Replies
    1. They've never said that the main reason is reduction of traffic volume. It's one of the side effects. The main reason is to increase the government's tax collection. It's to offset the decrease in income tax.

      Delete
  10. The article seems to contradict itself:
    The Senate version of the TRAIN Bill sees a much simpler excise tax levied on new vehicles. Under the finalized Senate version, vehicles with a Net Manufacturing Price of P 1 Million (P 1,000,000) will be taxed 10 percent while those costing more than P 1 Million (P 1,000,000) will be taxed 20 percent. This is a far cry from the proposed five-tier, two-phase implementation.


    With that being said, then why does some luxury cars even become cheaper?? There seems to be something wrong there?

    Any help?

    ReplyDelete
    Replies
    1. Simple.

      They will impose a flat tax rate of 20 percent on vehicles worth more than 1 million pesos.

      In the current structure, a vehicle above P 2.1M NMSP (Net Manufacturer Selling Price) is taxed 60 percent in excess of P 2.1M + P 512,000.

      Delete
    2. This comment has been removed by the author.

      Delete
    3. Basically, yes.

      Check the computation in my comment above.

      The short of it is that under the new tax system, luxury cars will become cheaper due to lower excise tax. Some, like a Lamborghini, will come with a P 5 million reduction.

      Delete
  11. Sir Uly, ask ko lang kasi may article kayo na pag ginawa sa ASEAN member country, d maapektuhan ng Excise Tax (http://www.carguide.ph/2017/09/mazda-moves-production-of-philippine.html), applicable ba yan sa lahat ng sasakyan built from ASEAN countries? For example yan VIOS, Alto or Civic they are built from Thailand, and also yong Mirage na built sa atin? Any thoughts?

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  12. bear in mind this is just the senate version.

    now congress and senate will have to negotiate, consolidate and come up with a joint version.

    so now the palace wants the senate and congress to consolidate their versions within 2 weeks, have it signed and published by dec 15 for effectivity jan 1, 2018.



    ReplyDelete
    Replies
    1. ^Correct. So now, we wait.

      Delete
  13. As an upper middle class person, I like this version. My future target purchase is the BMW 3 series and this will make it cheaper. It will enable middle class citizens to more likely afford luxury cars. However, it would be bad news to the lower bracket that buys b segment eco cars and cars that are priced near the 2m mark.

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    Replies
    1. Yabang naman nito.

      Delete
    2. pano naman naging mayabang yun? hes telling the truth. Grow up, i like this version better too.

      Delete
  14. Claasic Phils...If this is true then the Phils is really f*cked up beyond hope and repair, it just doesn't make sense...this will make the DU30 administration become unpopular with the masses from which he is getting massive support and power,they will revolt lol...I guess the senators werent able to get their Land cruisers etc...the lobbyists won again...good for us but what a curveball!

    ReplyDelete
    Replies
    1. how are we f#cked up by this? and how is this anti poor? classic commentor, just type anything that comes to mind and not read the article or the whole excise tax bill.

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    2. No wonder the Phils is in the state that it is now, you don't see how f*cked up the situation is when luxury cars bought by rich people go down in price and economy cars bought by common people go up??? That's f*cked up in itself... Lol

      Delete
  15. they're really squeezing the dying middleclass eh... but yeah it's not a high as we initially expected

    ReplyDelete
  16. uly

    the landcruiser is excise tax free because of jpepa , so will it still be tax free after the tax increase since this is excise tax exempt?

    thAnks

    ReplyDelete
    Replies
    1. The excise tax is different from the import duties.

      The Land Cruiser may benefit from JPEPA but it didn't exempt it from excise tax. Excise tax is computed based on landed cost which includes the import duties.

      Delete
    2. I think we are getting ahead here. This is the Senate version, together w/ the house version, it still has to be reconciled before a final version will come out. The outcome maybe close to or it could stray far from the original proposal of the finance dept.who is the principal author.

      Delete
    3. thanks for clarifying.

      all those free trade including asean is customs duties exemption whereas excise taxes remains.

      Delete
    4. i also think the final version passed will be closer to the dof proposal.

      senate version is just a negotiating ploy to temper the dof proposal.

      Delete
  17. Traffic here is horrendous and everyone suffers from high cost of transportation in terms of time, fuel and effort. Let's face it, most roads won't be getting any wider. It's time that we fix our mass transportion and accept the fact that owning a car become a privilege for those who are able to afford to. Look at Hong Kong and Singapore. Most people don't have a car and it's perfectly ok. I'd rather be able to get where I need to be in 15 minutes using mass transportation rather than suffer 3 hours of traffic driving a car.

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    Replies
    1. I agree. And it's as what they say. 'A true developed country is not when the poor can afford a car, but when the rich use the mass transport'.

      Delete
  18. Sir Uly what would be the price of WRX (CVT) based on this senate version, thank you.

    ReplyDelete
  19. Would dealers' old inventory be affected by the excise tax?

    ReplyDelete
    Replies
    1. Technically, no.

      But... It won't stop a dealer from declaring a stock as a 2018 model and say it's affected by the excise tax. Or impose the new SRP.

      Delete
  20. Sir Uly, i got an info that Mitsubishi will be releasing a new pricelist by Dec. 15 even though the TRAIN bill isn't sure to beat the deadline to become a law.

    ReplyDelete
    Replies
    1. The SUA auto maker trying to cash in πŸ˜‚

      Hey, apparently we can use emoji's here.

      Delete
    2. Just go to your emoji "smile" sign in your keyboard.

      Ex: Mitsubishi is πŸ’©

      Delete
    3. Not all info that you get from sales agents are true. Do verify your comment first.

      Delete
    4. I did verify my info from different mitsubishi agents before commenting. Apparently, they were very sure of the TRAIN Bill getting approved.

      Now, the TRAIN Bill is set to be ratified and be sent to the President for signing before Dec. 15. So who needs to verify his comment before commenting?

      Delete
  21. Never mind about the cars. Not every blue or white collar worker can afford the payments. Mind the levies on petroleum. It will surely create a domino effect on goods and services. Talk about this government promising the poor a better tomorrow!

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  22. The previously proposed excised tax kills the upper spectrum of car buyers in Philippines. If you want more tax collections you dont kill the upper spectrum. Thats basically the logic behind. Its not to limit the cars on the road. Its quite smart tbh.

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  23. Gas price will be way too high already compared to diesel...is there anyone who wants to buy my subaru xv? its a 2015 model with 9t on the odo. =)lol.

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  24. Sir Uly, could you do an update, maybe a follow-up article on before&after pricing of hybrids currently in the market? the dad's thinking of getting a retirement car next year, and it'd be nice if the prius c would close the price gap with the yaris/vios.

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    Replies
    1. Are you expecting a benefit from the newly revised excise tax? Coz lower end cars(<2M Php) wont really see benefit from it. Better buy now.

      Delete
    2. Are you expecting a benefit from the newly revised excise tax? Coz lower end cars(<2M Php) wont really see benefit from it. Better buy now.

      Delete
    3. >Allen TKO
      i asked for hybrids because as mentioned in the article, hybrids and electric vehicles will be tax-exempt. now i don't know how much of the prius c's msrp is tax, but if the msrp revision places it with TOTL compact cars of 1.2M, then it might just open the market to hybrids.

      Delete
  25. any news from our hardworking legislators?

    not much news on the bicameral conference considering there are some differences in tax proposals between the senate and congress.

    ReplyDelete
  26. This article is downright dumb.

    You're taxing something... how can the prices go down when you're taxing something!?

    The article says...

    "Under the finalized Senate version, vehicles with a Net Manufacturing Price of P 1 Million (P 1,000,000) will be taxed 10 percent while those costing more than P 1 Million (P 1,000,000) will be taxed 20 percent."

    Then why in the name of all things holy did you subtract from the SRP of Toyota Land Cruiser LC200 Premium and BMW X1 xDrive 20d xLine???

    ReplyDelete
    Replies
    1. somebody's being a keyboard warrior/troll/moron -_-

      there's an apparent reduction to the msrp of certain lux vehicles because of a change in tax tiers. the status quo is that cars base-priced below 600k,up to 1.1m,up to 2m, etc etc (i don't have the exact brackets memorized so my bad) taxed differently. whereas with TRAIN you only get two pricing brackets: up to 1m and beyond 1m

      others have already commented, about this, and the sourced article from Rappler was pretty clear on the subject/s, so yeah, congrats on flaunting your online bravado/idiocy.

      Delete
  27. Final Excise tax rates for cars and automobiles, are as follows:

    4 percent for vehicles priced up to P600,000
    10 percent for vehicles priced over P600,000 to P1 million
    20 percent for vehicles priced over P1 million to P4 million
    50 percent for vehicles priced P4 million

    apparently senate won over this round.

    they were able to temper the price inc for cars.

    ReplyDelete

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