Removing the excise tax exemption on pickup trucks would definitely raise prices and dampen demand for this commercial vehicle category, the most preferred utility vehicle for micro, small and medium enterprises (MSMEs), the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) warned.
CAMPI President Rommel Gutierrez admitted at the launch of the 8th Philippine International Motor Show (PIMS) that the move by the House Ways and Means Committee to remove the exemption of pickup trucks from excise taxation is a big concern among car companies in the country.
“Of course, we are concerned about additions in taxes. So this will definitely impact the prices and we are still recovering, we have not yet recovered fully to pre-pandemic levels,” he said.
Sales of light trucks or pickups in the first semester this year improved by 3.4 percent to 2,813 units from 2,721 units in the same first semester last year. In July alone, sales improved by 6.4 percent to 465 units from 437 units in June. But compared to July 2021, sales already posted a significant improvement at 14 percent.
Gutierrez explained that consumers as well as demand for this commercial vehicle category are price sensitive. Any additional taxes could dampen demand.
Atsuhiro Okamoto, president of Toyota Motor Phils. Corp. and Takeshi Hara, president of Mitsubishi Motor Philippines Corp. urged government to continue supporting their manufacturing operations in the country to ensure their continued contribution to the society.
Okamoto noted of the impact to the industry the proposed inclusion of pickup trucks for excise taxation. “Across the industry, we need to coexist with nature and the environment,” he said. To be sustainable, he said, they are requesting support from the government.
For his part, Hara echoed Okamoto’s statement. He said that Mitsubishi will continue local production guided by the requirements of the Philippines.
Gutierrez, however, clarified that there is no bill filed yet in Congress for the removal of excise tax on pickup trucks, but just a rider to an existing bill.
While the groups expressed their initial concern over the plan, Gutierrez said they will continue working with government as they had done in the past administration to collaborate and strike a balance. He cited the resolution on issue of safeguard duty on imported completely built up vehicles.
“We we were able to handle it in collaboration with government to strike a balance between the interests of government and the private sector, so it's there, we will continue to discuss with concerned government agencies,” he said.
The removal of the excise tax exemption on pickup trucks formed part of the additional measures that the Department of Finance (DOF) wanted for inclusion in the previously called the Passive Income and Financial Intermediary Taxation Act (Pifita) during the recent hearing at the House Committee on Ways and Means.
At the recent hearing at the House committee, the Department of Finance included other tax administration provisions in the comprehensive tax reform program, such as taxation of pickup trucks, which had failed to pass during the Duterte administration.
DOF Secretary Benjamin E. Diokno said that together with the Department of Trade and Industry (DTI), they would like to include 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.
Under the TRAIN Law, pickup trucks were exempted from excise tax as these commercial vehicle are being used for entrepreneurial purposes, especially for micro, small and medium enterprises.
However, DOF said that DTI had observed that pickup trucks are now being modified to serve for other purposes such as passenger cars, leisure, or sport utility vehicles. This has allowed manufacturers to circumvent the provision of the TRAIN law and purpose of the exemption.
While the previous administration tax package was revenue neutral, this time the DOF estimated additional tax collections reaching P52.6 billion from 2022 to 2026 with the removal of the excise tax exemption on of pickup trucks.