Pickup truck prices to rise as House okays excise tax

Pickup trucks will soon become more expensive as the Lower House’s committee on ways and means on Wednesday approved an expanded bill which included slapping excise taxes on this commercial vehicle segment.

The removal of the excise tax exemption on pickup trucks formed part of the additional measures that the Department of Finance (DOF) this week lobbied for inclusion in what was formerly called the Passive Income and Financial Intermediary Taxation Act (Pifita).

In the past, Pifita was pitched as a revenue-neutral capital markets taxation reform measure, which meant that the government won’t collect additional taxes once it passed into law; however, the bill approved by the House committee is now expected to yield incremental revenues amounting to P18 billion next year, and P7.9 billion in 2024, before collections taper off from 2025 onward.

The committee also approved the proposed mining fiscal regime, which Finance Assistant Secretary Valery Joy Brion said will add a total of P37.52 billion in tax revenues to government coffers. The measure will slap a 5-percent royalty on all large-scale mining operations in the country, plus a 10-percent export tax on the gross value of mineral ores, on top of remitting a minimum “fair” government share from industry revenues.

‘Enhanced’ tax bill

During Wednesday’s hearing, House ways and means committee chair and Albay Rep. Joey Salceda read a letter sent by Finance Secretary Benjamin Diokno to him last Monday, urging to pass an “enhanced” version of Pifita.

Besides reducing the number of tax rates on passive income and financial intermediaries to 52 from 74 at present, the DOF proposed to simplify the system through uniform and harmonized business tax rates, including on premiums of health maintenance organizations, life insurance, pension and preneed products.

The DOF also pitched to adopt a stock transaction tax, rationalized documentary stamp tax on financial transactions, as well as clarification of collective investment schemes taxation.

While vehicle taxes did not form part of Pifita, the DOF pushed for other tax administration provisions of the Duterte administration’s comprehensive tax reform program, which had failed to pass, such as that on taxation of pickup trucks.

“Together with the Department of Trade and Industry (DTI), we propose the inclusion of a provision removing the excise tax exemption of pickup trucks introduced under Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (Train) Law. Pickup trucks were granted the special tax treatment for their utility as workhorses for small business owners and professionals in their livelihood,” Diokno’s letter to Salceda read.

However, Diokno said that the DTI had observed that “manufacturers modify pickup trucks to serve as passenger, leisure or sport utility vehicles.”

“This scheme allows manufacturers to circumvent the provision of the [Train] law and purpose of the exemption,” Diokno said.

The DOF had estimated additional tax collections reaching P52.6 billion from 2022 to 2026 if excise tax will be slapped on pickup trucks.

In turn, the House ways and means committee approved these additional measures proposed by the DOF.