Congress approves reimposition of excise tax for pickups

The House of Representatives has approved a proposed measure that seeks to include bringing back excise taxes on pickup purchases, as part of efforts to generate increased revenues for the national government.

Excise taxes are bound to make a comeback on pickups 

Headed by Albay Rep. Joey Salceda, the House Committee on Ways and Means has greenlit the Passive Income and Financial Intermediary Taxation Act (PIFITA), also known as Package 4 of the Comprehensive Tax Reform Program or CTRP. One provision of the bill is the removal of excise tax exemptions for pickups.  

The recommendation was made by the Department of Finance through Secretary Benjamin Diokno in a letter to Salceda, saying that it is expected to earn net tax revenues of Php 52.6 billion from 2022 to 2026. This stemmed from the initial fiscal consolidation plan drafted by former Finance chief Carlos Dominguez III to address the significant debt pile resulting from the country’s COVID-19 response.   

The government claims that pickups currently skirt the basis of their tax exemption

“The plan is doable and is designed to secure the gains that we have made under the Duterte administration,” Dominguez said. Under Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law passed in 2017, pickups were exempted from automobile excise taxes along with electric vehicles.
 
“Pickups were granted the special tax treatment for their utility as workhorses for small business owners and professionals in their livelihood,” Diokno said. “The Department of Trade and Industry has 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 law and purpose of the exemption.”   

Those in the market for a pickup need to decide as soon as they can

Prices of pickups are expected to rise with the return of excise taxes to the segment, raising concerns on the automotive industry’s efforts toward recovery. Leonardo Lanzona, an economist at Ateneo de Manila University, warned that the move could push inflation higher. 

“While these measures are necessary, this will have implications on inflation and economic performance since the tax burden (is) just going to be transferred to the consumers,” he said.             

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