MANILA, Philippines — The Department of Finance (DOF) is pushing for the removal of tax exemption on pickup trucks under the remaining tax reform package, as this would provide P53 billion in additional revenues for the government.
In a letter to House of Representatives Ways and Means Committee chairman Rep. Joey Salceda, Finance chief Benjamin Diokno said the DOF has proposed additional measures to Package 4 of the tax reform package or the Passive Income and Financial Intermediary Taxation Act (PIFITA).
Backed by the Department of Trade and Industry (DTI), Diokno is pushing for the removal of the excise tax exemption of pickup trucks under the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
TRAIN was the initial package of the tax reform program of the Duterte administration.
Pickup trucks were granted special tax treatment for their utility as workhorses for small business owners and professionals.
“But DTI has observed that manufacturers modify pickup trucks to serve as passenger, leisure or sports utility vehicles. This scheme allows manufacturers to circumvent the provision of the law and purpose of the exemption,” Diokno said.
“Subjecting pickup trucks to excise tax will result in an estimated additional revenue of P52.6 billion until 2026,” he said.
PIFITA aims to simplify the fiscal structure for passive income, financial services and transactions, as the reform seeks to cut the number of tax rates for such instruments.
Based on the DOF-enhanced Package 4 proposal, the number of tax rates on passive income and financial intermediaries will be reduced from 74 to 52.
PIFITA also harmonizes the tax rates on interest, dividends and capital gains to a standard 15 percent. Further, the package removes the documentary stamp tax slapped on non-monetary transactions.
A single gross receipt tax rate of five percent will likewise be imposed on banks, quasi-banks and other non-bank financial intermediaries.
Similarly, pre-need, pension, life insurance and health maintenance organizations will be uniformly taxed at two percent of premiums.
The proposed tax rate will also be adjusted to make them comparable and competitive with tax rates of Southeast Asian neighbors.
“The DOF-proposed Package 4 draft bill will give the government an estimated incremental revenue of P18 billion in 2023 and P7.9 billion in 2024 before the collections taper off in the succeeding years,” Diokno said.
“However, with the reforms introduced under Package 4 and the expected developments in the financial and capital markets, the bill can generate reliable revenue streams for the government in the long-term,” he said.
The House of Representatives approved PIFITA on third and final reading in September 2019. However, deliberations in the Senate were put on hold following the pandemic.