Auto industry to feel impact of tax reform law

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Metro Manila (CNN Philippines, January 5) — The auto industry is expected to feel the impact of the provisions of the new tax reform law, with higher excise tax negating benefits from incentives for locally-manufactured vehicles.

Car sales soared to new highs ahead of the Tax Reform for Acceleration and Inclusion or TRAIN.

A representative from a Honda dealer in Rizal province said clients rushed to purchase vehicles to avoid the price hike in the wake of the tax reform law.

Almost all stocks were sold, leaving minimal display at the showroom. But after the calm comes the storm.

Honda Rizal Sales Manager Rowell Oblea said they see a significant drop in sales in the first quarter after hitting an almost 60 percent spike in sales last December.

"Nag-panic buying yung mga tao since October, so ang forecast namin ngayon gradually din bababa. Siguro mga 40-50 percent ang ibababa for the first quarter. Syempre the thinking ng mga tao tataas talaga yung ipapatong na tax," he said on Friday.

Trade Secretary Ramon Lopez earlier said he believes small cars may generally see a decline in sales.

The new tax reform law imposes a 4 percent excise tax on automobiles worth P600,000 and below from the previous 2 percent.

Automobiles between P600,000 and P1.1 million will be taxed 10 percent. The old tax rate was P12,000 plus 20 percent of the amount in excess of P600,000.

Meanwhile, premium car distributors are seeing a positive impact on sales this year.

TRAIN imposes a 20 percent excise tax on automobiles worth P1 million to P4 million. The old rate was P112,000 plus 40 percent of the amount over P1.1 million pesos.

Automobiles worth P4 million and above will now be taxed 50 percent. In the old rate, purchase of these cars bore a tax of P512,000 plus 60 percent of the amount in excess of P2.1 million.

Volvo Philippines said they are optimistic of sales with new models coming in by the middle part of the year.

"I think for the luxury segment in general it will make the vehicles more competitive in the market. It may not be the same in the mainstreams segment of the car industry because we do know that for certain segments and certain price ranges the prices will go up because of the excise taxes," Volvo Philippines Marketing Head Chris Yu said.

Although Volvo anticipates a decrease in excise taxes, its current prices are based on a high foreign exchange rate which means there'll be no drastic decrease in prices.

"So we have already been subsidizing to a certain extent the prices because we don't want our SRP to fluctuate so much," Yu said.