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Philippine Auto Exports Worth USD 1.4 BN Threatened by New Taxes

MANILA - The projected US$1.4 billion exports of automotive parts this year is in peril because the new excise tax ruling of the Bureau of Internal Revenues will translate to a further reduction in vehicle sales of local assemblers, the Motor Vehicle Parts Manufacturers Association of the Philippines (MVPMAP) said.

At present, some of the local parts are supplied to local motor vehicle assembler as their indirect exports.

"BIR Regulation 4-2003 is seen as an adverse measure, entirely disparaging and the issuance is very untimely," said MVPMAP executive director Rafael Villareal.

RR 4-2003 slaps an excise tax on all motor vehicles based on their engine displacement. The Asian utility vehicle (AUV) segment, which accounts for over 40 per cent of the domestic market, is the hardest hit with their prices rising between 35 per cent to 50 per cent.

AUVs have high local content compared to other vehicles reaching a high of 70 per cent, mostly supplied by MVPMAP members.

The higher taxes are expected to impact on sales volume. Last year and for the first time since the financial crisis in 1997, the total motor vehicles reached over 85,000 units or the same pre-crisis sales level.

MVPMAP has urged the government to sustain the momentum of the industry's recovery and development.

The would-be scenario, Villareal said, is that their parts production which is now at minimal level owing to limited market, would even be decimated MVPMAP have appealed to President Gloria Macapagal-Arroyo to intervene for the withdrawal of the RR and called for the immediate passage of the House Bill, which will impose only a minimum of three per cent to a maximum of 15 per cent excise tax on AUVs depending on the value of the vehicle.

Under this situation, Villareal said, car makers would opt not to produce vehicles this time when the selling prices would be high.

The natural recourse, he said, is for car makers to wait until the law is passed.

Villareal warned that reduced sales of the local parts makers would translate into the lay-off of workers of their mostly SME members, which constitute 70 per cent their sector.

There are 256 firms in parts manufacturing employing 27,000 people. Last year, total parts exports reach US$1.12 billion.

Considering the whole automotive industry, the RR will affect the total industry employment of about 48,000.

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