The comprehensive tax reform package under House Bill 5636 will now be known as the Tax Reform for Acceleration and Inclusion bill, or TRAIN.
The House just passed on third and final reading of the bill before the first regular session of the Congress adjourned. The House voted 246 for, only 9 against, the bill, and a single abstention. So far, the bill seems to be on track as the target effectivity date of the comprehensive tax program is on January 1, 2018.
Under the TRAIN, the current tax system will be overhauled. Income tax brackets will be reclassified, with people earning less than P250,000 to be spared from income tax.
Meanwhile, there will be an expansion of value-added tax (VAT) as well as excise tax on petroleum products. However, one of the biggest items drawing attention in the said bill is the proposed excise tax on cars.
How will this affect your purchasing power? We’ve rounded up some of the most famous vehicles in the country and did the math so you don’t have to.
Current vs. 2018 and 2019 prices of cars
In a nutshell, the TRAIN bill will implement a tiered levy system that will impose taxes on vehicles based on their value. The raise will be gradual and divided into two phases.
The following rates and tiers below will be followed against the Net Manufacturer’s/Importer’s Selling Prices (NMISP) once the bill gets the signature of President Rodrigo Duterte:
|Excise tax effective as of January 1, 2018||Excise tax effective as of January 1, 2019|
|Bracket 1||NMISP*||Below P600,000||Below P600,000|
|Excise (variable)||3% flat rate||4% flat rate|
|Bracket 2||NMISP*||P600k to under P1.1 million||P600k to under P1.1 million|
|Excise (variable)||30% of value in excess of P600,000||40% of value in excess of P600,000|
|Bracket 3||NMISP*||P1.1 million to under P2.1 million||P1.1 million to under P2.1 million|
|Excise (variable)||50% of value in excess of P1.1 million||60% of value in excess of P1.1 million|
|BRACKET 4||NMISP*||P2.1 million to under 3.1 million||P2.1 million to under 3.1 million|
|Excise (variable)||100% of value in excess of P2.1 million||100% of value in excess of P2.1 million|
|BRACKET 5||NMISP*||P3.1 million and above||P3.1 million and above|
|Excise (variable)||120% of value in excess of P3.1 million||120% of value in excess of P3.1 million|
Among the noticeable amendments featured in TRAIN’s version that passed the congress are the inclusion of a fifth tier for cars worth P3.1 million and above, and lower rates for cars valued at P1.1 million and above.
If approved by the Senate once it reconvenes next month, then determining the prices of vehicles once the law takes effect will be easy, given that the rest of the price factors remain constant.
CarGuide.ph says that in order to get the new suggested retail price under the new excise tax scheme, one has to get the net selling price. This means subtracting costs such as the 12-percent value added tax, around 15-percent overhead split between the manufacturer and the dealer, and the excise tax from the old taxing scheme.
Thinking of buying a car next year when the TRAIN is in effect? These will be the prices of some of the cars available on the Philippine market, based on the estimates of CarGuide.ph:
|Model||Current price||2018 price with excise tax (estimate)||2019 price with excise tax (estimate)|
|Hyundai Eon GLX||P508,000||P512,980||P517,961|
|Suzuki Ciaz 1.4 GLX||P888,000||P904,040||P920,080|
|Toyota Vios 1.5 G||P919,000||P937,623||P956,247|
|Honda BR-V 1.5 V Navi||P1,119,000||P1,154,290||P1,189,580|
|Honda Civic RS Turbo||P1,403,000||P1,461,957||P1,520,913|
|Chevrolet Trailblazer 2.8 Z71||P1,881,888||P1,976,993||P2,071,977|
|Ford Everest 3.2 Titanium 4WD||P2,109,000||P2,220,267||P2,331,534|
|Lexus IS 350 F Sport||P3,228,000||P3,419,195||P3,610,391|
|BMW X1 xDrive20d xLINE||P3,340,000||P3,539,195||P3,738,391|
Based on the data provided, the effect of the new excise tax scheme varies on the tier of the vehicle. Expect cars priced below seven digits to have a slight price increase. Meanwhile, luxury cars in the Philippines will be more unattainable and, perhaps, exclusive to the truly affluent class.