The proposed Capital Market Efficiency Promotion Act (CMEPA) being pushed by the Legislative-Executive Development Advisory Council (LEDAC) has removed the planned reimposition of excise tax on pick-up trucks such that the bill, if passed into law, would result in foregone revenues for the government.
During a Senate ways and means committee hearing on Monday, Oct. 7, its chair Senator Sherwin Gatchalian noted that the LEDAC chaired by President Ferdinand Marcos Jr. is now pushing for CMEPA under House Bill (HB) No. 9277, which has been carved out of HB 4339 or the Passive Income and Financial Intermediary Taxation Act (PIFITA).
These bills contained the package of reforms covering taxes on financial transactions pitched by the Department of Finance (DOF) as part of its continuing comprehensive tax reform program.
Based on the estimated revenue implications presented by Finance Assistant Secretary Karlo Fermin S. Adriano at the hearing, the DOF's proposal would generate additional tax collections amounting to P10.76 billion from 2025 to 2028, while HB 4339 would gain a smaller P7.46 billion.
On the other hand, CMEPA would cost the government tax revenue losses totaling P140.11 billion in the next four years, DOF estimates showed.
One major reason is that CMEPA no longer included the DOF's proposal to reimpose excise on pick-ups, which had been included in PIFITA to slap taxes ranging from four to 50 percent, depending on the net manufacturer's price or importer's selling.
To recall, while vehicle taxes did not originally form part of PIFITA, the DOF has been pushing for other revenue-enhancing measures that failed to pass during the previous Duterte administration, including taxation on pick-up trucks.
Excise taxes on pick-ups would be adding a total of P30.06 billion to the government's tax take—P6.4 billion in 2025, P7.09 billion in 2026, P7.86 billion in 2027, and P8.71 billion in 2028.
Sources told Manila Bulletin that legislators in the Lower House were no longer keen to slap tax on pick-ups trucks.
Adriano, who heads the DOF's fiscal policy and monitoring group, told Gatchalian that they would want to make CMEPA or capital markets tax reform at least revenue-neutral, which meant that the government wouldn't collect incremental revenues once it passed into law.
Back in 2022, former finance secretary Benjamin E. Diokno proposed to include a provision in PIFITA removing the excise tax-exemption of pick-ups introduced under Republic Act (RA) No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
While pick-up trucks had been granted the special tax treatment for their utility as workhorses for small business owners and professionals in their livelihood, Diokno back then noted that the Department of Trade and Industry (DTI) had observed that "manufacturers modify pick-up trucks to serve as passenger, leisure, or sports utility vehicles (SUVs)."
"This scheme allows manufacturers to circumvent the provision of the [TRAIN] law and purpose of the exemption," Diokno had explained.