DTI supports review of excise tax on pickup trucks

MANILA, Philippines — The Department of Trade and Industry (DTI) expressed support for the review of the excise tax exemption on double cab pickup trucks, according to Trade Secretary Alfredo Pascual.

In a statement, Pascual said the regular single-cab and chassis pickup, which he described as the real utility workhorse vehicle, has always been exempted from excise tax even before Tax Reform for Acceleration and Inclusion (TRAIN) Law.

“The TRAIN Law extended the exemption to the double-cab pickup ostensibly to support the cargo mobility requirement of the MSME (micro, small and medium enterprises) sector,” Pascual said.

“However, it seems that the imported double cab pickup is often a fully-accessorized passenger unit – a lifestyle vehicle far from the need and reach of MSMEs,” he said.

The Trade Secretary said that since the excise tax exemption applies to the whole vehicle, the double cab pick-up accessories are also exempted from excise tax.

The House of Representatives’ Committee on Ways and Means has approved various measures, including the removal of the excise tax exemption of pickup trucks under the bill formerly known as the Passive Income and Financial Intermediary Taxation Act (PIFITA).

Chamber of Automotive Manufacturers of the Philippines president Rommel Guitierrez earlier said CAMPI would seek a dialogue with the government regarding the proposal to remove excise tax exemptions on pickup trucks to discuss the industry’s position.

On the sidelines of the Philippine International Motor Show last week, Gutierrez said the group is still preparing its position paper.

Gutierrez said that the current setup for excise tax for pickup trucks should be maintained, emphasizing that it is very helpful for small businesses.

“This excise tax is not just about the auto industry. It’s about the multiplier effect of these things – because MSMEs are using this for their businesses,” Gutierrez told reporters.

Gutierrez earlier affirmed the auto industry’s concerns on the removal of the exemption as the addition of taxes as it will impact prices.

“We are still recovering, we have not yet recovered fully to pre-pandemic levels,” Gutierrez said previously.

He said pickup trucks account for around 17 percent of total vehicle sales in the country.

He expressed the need for the industry and government to work together to address concerns on the additional excise taxes for vehicles.

“It’s really a collaboration between the government and private sector. So we want to strike a balance of government intention and the situation of the auto industry,” Gutierrez said.

The Department of Finance (DOF) earlier said the removal of tax exemption on pickup trucks under the remaining tax reform package 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 Secretary Benjamin Diokno said the DOF has proposed additional measures under Package 4 of the tax reform package or PIFITA.

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 the 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 earlier.

“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.