The Department of Finance (DOF) and the Department of Trade and Industry (DTI) are headed for another policy face-off, after Finance Secretary Carlos G. Dominguez III said he is standing by his proposal to hike excise taxes on automobiles as a way to ease traffic congestion and raise revenue collection.
This is amid the plea of the DTI for the DOF to go slow on the auto industry, whose manufacturing operations in the country are currently being revived by the trade department through its Comprehensive Automotive Resurgence Strategy (CARS) Program.
The finance chief euphemistically turned his back on the DTI appeal, when he said the DOF will give the trade department’s suggestion a “good consideration”. Dominguez insisted that the proposal to increase the auto-excise tax will help relieve the worsening traffic congestion in Philippine megacities, due in part to the slow rollout of road networks in the past administration.
“The objective of that [excise-tax hike] is to slow down, give us relief on the number of cars being put on the road. There were only 4 kilometers of new roads constructed in the last six years by the past administration,” Dominguez said on Wednesday evening.
“You want to slow down because the cities are getting clogged. The worst traffic is in Cebu; Manila is terrible and Davao is fast catching up. So how are you going to deal with that, add more cars?” he added.
This comes amid the proposal of the DTI to adjust the excise tax to only 1 percent to 2 percent for vehicles priced P1 million and below.
This was a counterproposal to the DOF’s move to set the floor price to P600,000 and below with a rate of 4 percent, then a rate of 40 percent of the value in excess of P600,000 + P24,000 for those priced above P600,000 but not more than P1.1 million. The DTI believes that its counterproposal would already shield the models enrolled in its manufacturing-stimulus program for the automotive industry. This is because those to be covered by CARS are priced below its proposed threshold.
Toyota Motor Philippines Corp. and Mitsubishi Motors Philippines Corp., the two participants in the government’s CARS, are banking on the fiscal support from the program, to increase production and help make the country a vehicle-manufacturing hub.
These prospects, however, have been clouded by the sudden proposal of the new administration to increase excise taxes on vehicles as a revenue-offsetting measure to the lowering of personal and corporate income taxes.
The two carmakers have already invested significantly in new facilities and equipment in complying with the CARS requirements. Reports from the Chamber of Automotive Manufacturers of the Philippines Inc. and Truck Manufacturers Association showed that the industry sold 359,572 units last year, up from the 288,609 units recorded in 2015.