Gatchalian Warns of Smuggling Ahead of Luxury Car Tax

Senator Win Gatchalian has warned the Bureau of Customs to be prepared to combat the higher incidence of car smuggling when additional excise taxes are imposed on the sale of luxury vehicles.

Gatchalian said shrewd stakeholders in the automobile industry are likely to engage in the underground trading of high-end vehicles to dodge paying exorbitant excise taxes.

"In my view, the incidence of smuggling will also go up when higher excise taxes are imposed on luxury cars. If this happens, it should not be 'business-as-usual' for the Bureau of Customs. The BOC should be ready to deal with these smugglers," Gatchalian said during a hearing of the Senate Committee on Ways and Means on the proposed new excise tax on automobiles.

Importers and distributors of high-end ultra-luxury vehicles told the Senate panel that an estimated 20% of cars sold in the market are smuggled by unscrupulous traders through the country's various ports.

The estimate, Gatchalian said, could grow bigger when car dealers and traders use backdoor channels to bring in their products to elude paying proper duties and taxes.

"The Bureau of Customs needs to have a strong strategy to make sure that the increase in the tax on luxury vehicles will not result in unabated smuggling," he stressed.

He also warned that, "only smugglers will earn money if the new excise tax on high-end cars turns out to be too expensive."

Under the proposed new excise tax scheme for vehicles, cars costing more than P2.1 million would be taxed P1.22 million (up from P512,000) plus 200 percent (up from 60 percent) of the amount in excess of P2.1 million.

Luxury cars in the country include automotive brands like Jaguar, Land Rover, Ferrari, Lamborghini, Bentley, Rolls-Royce, and Aston Martin.