DISCOUNTS offered by dealers for new Toyota models may be reduced once the proposed increase in automobile excise taxes is implemented as part of the Duterte administration’s tax reform agenda spearheaded by the Department of Finance (DOF).
Francisco Suarez, chief financial officer of conglomerate GT Capital Holdings Inc., parent of Toyota Motor Philippines Corp. (TMP), said during a briefing late Wednesday that the DOF’s proposed excise tax hike of 5 percent from the current 2 percent for automobiles will likely be absorbed by the discounts offered by Toyota dealers at present.
TMP is the local manufacturer and distributor of Toyota vehicles in the Philippines and is the leading brand in the country, cornering about 40 percent of the market.
“Actually on the excise tax proposal, the plan is to increase it from the current 2 percent to 5 percent. That is just the classic example for vehicles priced P600,000 and below. So currently, if it’s a P600,000 vehicle, it is taxed P12,000. At 5 percent [excise tax rate], that would increase the tax to P30,000, so effectively an increase of about P18,000 per unit,” Suarez said.
“So that P18,000 is more or less similar to the discount provided by the dealer whenever you purchase a vehicle. Normally, if you purchase a Vios nowadays, the dealer would give you a discount ranging from about P40,000 to P50,000. So that P18,000 will probably be just within the discounts provided for by the dealers,” he added.
The DOF submitted a proposed tax reform agenda to Congress last week, which includes an increase in the excise taxes on automobiles. Under the proposal, new vehicles produced or imported which are priced P600,000 and below will have an excise tax of 5 percent from the current 2 percent.
For cars priced at P600,000 to P1.1 million, the excise tax will be 20 percent, and for vehicles priced between P1.1 million and P2.1 million, the tax will be 40 percent. Those priced P2.1 million and above will have a 60 percent excise tax.
“It’s probably the dealer absorbing that increase or it could be passed on to the buyers. The P18,000 represents a less than 2 percent increase if ever that’s passed. But then again, this proposal, the tax reform agenda that was submitted to Congress last week, we’d like to highlight that it’s a proposal at the moment, so it’s not subject to any hearings at the moment. No congressman has actually agreed to sponsor the bill,” Suarez said.
Suarez pointed out that the DOF did not consult industry stakeholders such as the Chamber of Automotive Manufacturers of the Philippines Inc. (Campi) and Association of Vehicle Importers and Distributors Inc. (AVID) on its proposed tax rates.
He expects the proposal to still undergo congressional hearings to fine-tune the tax rates with the producers, dealers and buyers.
“When the DOF submitted the reform agenda to Congress, there was yet no consultation with the stakeholders. We will only have a grasp when hearings start. But we feel that that [the rates]would be negotiated,” Suarez said.
The latest Campi data show that TMP sold 261,370 units in September, making Toyota the top grosser in the industry with a 43.78-percent market share during the month.
TMP is targeting sales of 150,000 units this year from actual sales of 125,000 units last year. By 2020, the target is 200,000 car sales annually.
Toyota has committed to a P3.22-billion investment starting 2016 for the mass production of its volume model unit Vios under the Comprehensive Automotive Resurgence Strategy (CARS) Program, which can lead to a total production of 230,000 units from 2018 to 2023.
TMP parent GT Capital also has businesses in banking (Metrobank), real estate (Federal Land and Pro-Friends), power (Global Business Power), automotive leasing and financing (Toyota Financial Services Philippines Corp.), and life insurance (AXA Philippines).