Home Business and Money How will vehicle prices be affected with the increased automobile excise tax?

How will vehicle prices be affected with the increased automobile excise tax?

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The Department of Finance clarifies report about a previous news regarding the increased prices of vehicles should the bill to increase automobile excise taxes be approved in the house.

Last year, the government mulled on imposition of excise taxes on new vehicles to raise revenues and to manage vehicle volume on major roads.  The proposed increase in taxes is one of the government’s moves to address traffic crisis in major cities natiowide.

According to Department of Finance (DOF), the current automobile excise rates will also be increased, on top of oil excise, for progressivity.  In the proposed system, basic cars will be taxed at lower rates while higher rates will be levied on more expensive cars.  These revised rates are considerably lower than the original proposal.

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In the proposed excise tax, vehicles worth less than P600,000 will be taxed 4% (from the current rate of 2%).  For vehicles prized between P600,000 to P1.1 million, the current tax is computed as P12,000 + 20% in excess of 600,000. In the new proposed rates, the tax will be increased to P24,000 + 40% in excess of 600,000.  See the computation below.

Computation of the new vehicle excise rates
How will the proposed excise tax on automobiles be computed? Source: Department of Finance

Given the above proposal, new cars will be around P50,000-P300,000 more worth than its current prizes.  An over a million worth increase is expected for high-end cars.

Prices of new cars in the Philippines based on new excise tax
How will the proposed excise tax on new vehicles affect its prices? Source: Department of Finance

The house will still approve the new bill. In an earlier interview by ABS-CBN News, House ways and means committee chairman Dakila Carlo Cua, said he is not 100 percent sold on the proposal, but said it is worth studying.

“If you ask me, I do not 100 percent subscribe to that notion because this issue is limited to the urban areas like Metro Manila, Cebu and a few other parts of the country. In places like Quirino or maybe Mindoro, traffic is not much of a problem. So we would like also for the people who are in the provinces to have the option to purchase a vehicle at an affordable package,” Cua said.

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