New BIR ruling biased against luxury vehicles, says BMW PH exec

Will hurt sales of premium cars
by Vernon B. Sarne | Apr 10, 2013
CAR BRANDS IN THIS ARTICLE
BMW

Asian Carmakers Corporation's Glen Dasig

If you're a professional or a high-ranking corporate executive who uses luxury vehicles and deducts their purchase and maintenance costs from your or your company's taxable income, you should read this. On October 17, 2012, the Bureau of Internal Revenue implemented Revenue Regulation No. 12-2012, formally called "Deductibility of Depreciation Expenses as It Relates to Purchase of Vehicles and Other Expenses Related Thereto, and the Input Taxes Allowed Therefor."

In essence, what this new revenue regulation stipulates are the following:

* A professional (lawyer, doctor, musician, etc.) or a corporate executive can now only have just one official car whose cost, expenses and depreciation can be deducted to its owner's taxable income;

* A professional or a corporate executive may now only purchase a car worth P2,400,000 or below for him/her to be able to deduct the car's cost, expenses and depreciation from his/her or his/her company's taxable income.

The purpose of this new regulation is to curb the rampant taxation cheating among professionals and companies that declare their personal vehicles as deductible expenses. The problem with it, however, is that it is "very discriminatory" against sellers of luxury vehicles, Asian Carmakers Corporation executive director Glen Dasig told TopGear.com.ph. ACC is the exclusive distributor of BMW cars in the Philippines.

"In our product lineup, we only have two models priced below P2,400,000--the 116i and the 118d," said Dasig. "This means professionals and corporate executives can now just choose from small cars if they want to use a luxury vehicle."

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Meanwhile, Lexus only has one car (CT200h) priced below P2,400,000, Mercedes-Benz also has one (B160), Volvo has two (C30 and S40), and Audi has none. All the luxury cars that qualify for the new BIR regulation are classified as compact vehicles.

This will ultimately impact sales of luxury cars, which already suffered from the BIR's aggressive lifestyle check last year. According to Dasig, total vehicle sales in the country grew by 7% in 2009, while luxury vehicles improved by 18%. In 2010, those numbers were +27% for both total and luxury vehicle sales. In 2011, total vehicle sales had a slight dip of 1%, but luxury vehicle sales still registered a healthy 8% growth.

Last year? Total vehicle sales increased by 11%, while luxury vehicle sales went down by a significant 14%.

"ACC commends the government's laser-like focus on improving tax collection in the country," Dasig added. "We still believe that our customers will continue to want to experience our products regardless of the costs."

We all support the government's drive for a more efficient--and more honest--tax collection. But RR No. 12-2012 does seem to discriminate against luxury cars. In its desire to prevent tax cheats from circumventing its policies, the BIR is now penalizing those who have always been ethical and transparent in the first place.

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