AER press release supporting automobile excise tax reform

Civil society group supports automobile excise tax reform

 

“We believe that having cars is a luxury while public transportation is a right. Only six percent of households in the Philippines own a car while the rest only have access to poor and inadequate mass transport systems,” said Jo-Ann Diosana, AER Senior Economist.

 

AER cited that the Philippines has one of the lowest excise tax rates on automobiles in Southeast Asia, since the said taxes have not been adjusted in the last ten years. The Philippines is currently imposing a two-percent ad valorem rate, whereas, Indonesia’s is five times higher than that at ten percent.

 

“A significant increase in the excise tax rate is necessary to improve the fairness and equity of our tax system. The non-adjustment of taxes on automobiles for the past years has benefitted only those who can afford cars at the expense of the poor and commuters, who struggle daily with our miserable public transportation,” Diosana said.

 

In a statement also released to the media during the hearing, AER said the comprehensive tax reform policy, in which the automobile excise tax is one of the essential elements, will address the huge financing gap to implement the mass transit plans.

 

“What can be a better way to collect the financing gap than from those who have the capacity to contribute to building the nation’s transport system?” Diosana added.

 

“Considering the government’s Comprehensive Automotive Resurgence Strategy (CARS) as part of a manufacturing revival program, the study of the Department of Trade and Industry on employment and output effects must be taken into consideration in the tax design. Collection of firm-level data from the automotive industry is necessary to estimate the elasticities that will guide the policy design,” Diosana explained.

 

AER said they support the excise tax proposal automobile but this should not negate the CARS Program of the government.

 

AER is a fiscal policy reform advocacy organization and was one of the organizations instrumental in the passage of the Sin Tax law in 2012.

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