Car makers protest removal of excise tax exemption for pickup trucks

Rommel Gutierrez

The Philippines’ largest industry association of vehicle manufacturers is opposing moves to impose an excise tax on pickup trucks, warning it will derail the recovery of the local automotive industry.

The Chamber of Automotive Manufacturers of the Philippines (Campi) said on Friday they were strongly objecting to the proposal of removing the tax exemption, which was first included in the Tax Reform for Acceleration and Inclusion (TRAIN) law to help small businesses favoring that kind of vehicle.

“Any new tax on motor vehicles will certainly derail the recovery efforts of the automotive industry,” Rommel Gutierrez, president of Campi, said in a message sent to the Inquirer on Friday.

The House of Representatives’ committee on ways and means approved on Wednesday the inclusion of various provisions in a tax reform measure formerly called the Passive Income and Financial Intermediary Taxation Act (Pifita).

Pifita was earlier introduced as a revenue-neutral capital markets taxation reform that meant no additional taxes would be collected by the government once it becomes a law.

It was supposed to be the fourth component of the TRAIN law, signed into law by former President Rodrigo Duterte in 2017.

The Department of Finance (DOF) said pickup trucks were earlier granted special tax considerations for being workhorses for small business owners and professionals.

Circumventing the law

Citing the Department of Trade and Industry, the DOF said, however, that manufacturers were modifying pickup trucks to serve as passenger, leisure or sports utility vehicles.

The DOF had argued that the current tax scheme allowed manufacturers to circumvent the law and the purpose of the exemption itself.

If passed into law, the modified Pifita is projected to bring in incremental revenues amounting to P18 billion next year and P7.9 billion in 2024, before collections begin to taper off in 2025. President Marcos’ administration is looking for alternative means to finance the country’s COVID-19 recovery efforts.

“Such imposition will negatively impact sales volume, thereby reducing revenues to the government,” Gutierrez said of the planned measure, adding that the automotive industry has yet to achieve sales volume equal to prepandemic levels.

Latest data from Campi showed the light commercial vehicle segment, where pickup trucks are classified under, has a 79.12-percent market share.

About 108,660 units were sold from January to July this year, 36.2-percent higher than the 79,777 units sold in the comparable period in 2021.

To date, there are at least 15 pickup models in the Philippines, according to listings in various car classifieds sites online. INQ