Pickups currently enjoy exemption from excise taxes to encourage small- and mid-size enterprises (SMEs) as drivers of economic growth. That incentive may soon disappear by 2023, with exemptions potentially being removed on these workhorses, resulting in higher prices.
The TRAIN Law exempted all pickups from excise tax in 2017, allowing more models to arrive in our market
This is part of the Package 1 proposal by the Department of Finance (DOF) set to take effect next year, as it grapples with the task of addressing the mounting national debt, currently at Php 12.68 trillion. These dues were incurred through infrastructure projects under the government’s “Build, Build, Build” program, as well as COVID-19 pandemic response.
Among the planned measures to improve the country’s fiscal situation is the repeal of tax exemptions on a wide range of goods and services, including pickups. These vehicles were among items that were shielded from excise tax by the passage of the Tax Reform for Acceleration and Inclusion (TRAIN) Law, signed in December 2017.
Back then, the measure expanded the tax exemption to include all pickup models and variants, as only single-cab chassis versions were tax-exempt prior to 2018. The government was said to be considering a return of excise taxes on pickups as early as 2020, reportedly part of a wider plan to tax imported vehicles.
The government is also considering an excise tax on motorcycles
An excise tax on motorcycles is also being studied. The government expects to raise an additional Php 19.2 billion in revenue from the resulting levies on both motorcycles and pickups alone. These vehicles have seen increased use during the pandemic, as businesses stopped operations and Filipinos who found themselves out of work pursued alternative means of livelihood.
However, a reimposition of excise taxes on pickups and motorcycles will significantly increase prices, putting them out of reach of potential customers, including entrepreneurs. The resulting drop in sales is seen to have a negative impact on the country’s auto industry, which is still reeling from the effects of the pandemic.
Owners of existing vehicles will also need to brace themselves for a potential increase in the Motor Vehicle Users’ Charge (MVUC), one of the line items paid for during registration renewal. The proposed unitary rate will be based on the gross vehicle weight and is seen to raise Php 38.3 billion.
Finance Secretary Carlos Dominguez III
Finance Secretary Carlos Dominguez III has warned that failing to implement changes in revenue collection will affect government spending on necessary socioeconomic programs and force it to take on even more debt.
“Not pursuing a fiscal consolidation and resource mobilization program may likely lead to serious and spiraling consequences to our financial and economic health,” he said.
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