DOF opposes proposal to exempt e-vehicles from VAT

The Department of Finance (DOF) is opposing a proposal to exempt electric vehicles (e-vehicles) from the value-added tax (VAT), saying that there are enough measures to incentivize the industry.

“We support the purpose of the bill. It will promote the use e-vehicles. However, we express concern with respect to the VAT exemption supposed to be granted in the bill,” Finance Undersecretary Bayani Agabin said during the Senate Committee on Energy hearing for the “Electric Vehicles and Charging Stations Act” on Wednesday.

The Finance official noted that the Tax Reform for Acceleration and Inclusion (TRAIN) law has already limited VAT exemptions “so we will have a wide tax base.”

“The proposal to grant VAT exemptions to the sale of e-vehicles is not the proper way to incentivize the sale of e-vehicles. We have enough laws, we have BOI (Board of Investments) which grants tax holidays, duty-free on imports, they can avail of that,” Agabin said.

Under the proposed Senate Bill No. 174 or “An Act Providing the National Policy and Regulatory Framework for the use of Electric Vehicles, and the Establishment of Electric Charging Stations,” e-vehicles shall be exempted from the VAT.

This will be available until nine years after the law takes effect.

Senate Energy committee chair Senator Sherwin Gatchalian said the purpose of fiscal incentives is to further develop the e-vehicles industry and help them compete “head-to-head” with internal combustion engine vehicles.

However, Agabin said e-vehicles already enjoy fiscal incentives and are exempted from paying excise taxes under the TRAIN law.

The TRAIN law has imposed higher excise taxes on motor vehicles.

It imposed a tax rate of 4 percent on vehicles costing P600,000 and below, from the previous rate of 2%.

Cars priced at P600,000 to P1 million were slapped with a 10% tax from 2%.

Cars priced between P1 million and P4 million were given a tax rate of 20% from the previous scheme of P112,000 plus 40% in excess of P1.1 million for cars costing P1.1 million to P2.1 million.

Vehicles that each cost P4 million and above were levied a rate of 50% from the previous scheme of P512,000 plus 60% in excess of P2.1 million.

In an interview with reporters, Gatchalian said the DOF’s suggestion not to exempt e-vehicles from the VAT should be studied carefully to balance the interest of the e-vehicle industry and the government’s aim to reform the tax system.

“One of the clamor of the industry is make it affordable to anyone, and nakita natin na almost 30-40% goes to taxes, tariffs, and duties ‘yung [retail] price ng e-vehicles ... Gusto natin maging affordable so it can penetrate the market as quickly as possible,” he said.

“But alam ko rin na ang DOF is doing reforms. One of the reforms they want is to eliminate all VAT exemption from our laws,” he added.— RSJ/VDS, GMA News