Aside from the lower income taxes, one of the most talked about part of the Tax Reform Acceleration and Inclusion (TRAIN) bill is the excise tax on cars.
From a consumer’s standpoint, this means cars will become less accessible with the additional taxes imposed. On the other hand, car manufacturers are also worried because hesitation on the part of the public to buy new cars could negatively impact the continuous growth that the automotive industry has been enjoying for the past few years.
The government, however, deems the new excise taxes as necessary for the current administration to continue with their massive infrastructure program.
With the bill finally given a green light by President Duterte, we now have the final rates of the car excise tax that is expected to affect the price of vehicles. Under the signed TRAIN bill, the following will be the schedule of the automotive excise tax:
- Vehicles worth P600,000 and below: 4%
- Vehicles worth above P600,000 but below P1 million: 10%
- Vehicles worth above P1 million but below P4 million: 20%
- Vehicles worth P4 million and above: 50%
Electric vehicles and pick-ups are excluded from the new tax schedule while hybrid vehicles are taxed at half the rates.
To have an idea about the difference between the new car excise tax and the old, here are the rates the TRAIN will supplant:
- Vehicles worth P600,000 and below: 2%
- Vehicles worth above P600,000 but below P1.1 million: P12,000 + 20% of the amount in excess of P600,000
- Vehicles worth above P1.1 million but below P2.1 million: P112,000 + 40% of the amount in excess of P1.1 million
- Vehicles worth P2.1 million and above: P512,000 + 60% of the amount in excess of P2.1 million
Computing the new excise tax
Getting the potential rates of car prices with the new excise tax rates can be tough, especially since it isn’t as easy as just applying the new rates to the current price tags of vehicles in the market. A car’s manufacturer suggested retail price (MSRP) is broken down into the following costs:
- Excise tax
- Wholesale profit
- Dealer’s profit
- Value-added tax (VAT)
- Net manufacturer’s/importer’s selling price (NMISP)
According to motoring site CarGuide, the wholesale and dealer’s profits are rated at around 7% and it is based on the NMISP, which is the at-cost price of the car before taxes. The NMISP is where the excise tax rates are computed. Meanwhile, the VAT is computed after the excise tax and profit margins for both the manufacturer and the dealer are included. Once all the mentioned rates have been added, car companies round up their prices to arrive at the MSRP.
In a nutshell, a car price’s formula looks like this:
MSRP = ((NMISP + excise tax) + 7% dealer’s profit + 7% wholesale profit) + 12% VAT
Honda Cars Philippines was the first one to update the prices on their website, showing as low as 0.9% and as high as 8.5% increases on, for example, the Honda HR-V.
And since the NMISPs of cars are heavily guarded by automotive manufacturers, we can only make a guesstimate on how other manufacturers will price their models.
To see the potential effects on the vehicles with different prices, we tried to get the closest possible NMISP using the formula above.
The following figures are the potential prices of vehicles once the new excise tax kicks in. Keep in mind that the following digits assume that the excise tax is solely shouldered by the consumers:
|Mitsubishi Mirage GLX 1.2 MT||Toyota Vios 1.5 G||Mazda MX-5||Audi R8 V10 Plus|
Just remember that these new rates are unofficial, and they might not completely match the prices the manufacturers will post once TRAIN kicks in–but they are a good rough guess and should give those eying a new car for the new year something to think about.
Other sources: Top Gear Philippines, Carguide.ph, Autoindustriya, The Philippine Star