In case you haven't noticed, the country's debt has skyrocketed to PHP 12.68 trillion as of March 2022 according to the Bureau of Treasury. The rise of the country's debt is largely due to the pandemic, as well as the big-ticket projects under the government's “Build, Build, Build” program. With such a big amount to pay back, the next administration will have a lot on its hands.
But in order to raise funds to pay off the huge debt, the Department of Finance (DOF) has proposed raising taxes. Not only that, but the DOF has also laid out plans to defer personal income tax reductions, expand the Value Added Tax (VAT), impose charges and taxes on gaming (casinos), and impose an excise tax on single-use plastics and on luxury goods.
What really caught our attention, however, was the proposal to repeal the excise tax exemption of pick-up trucks. There are no exact details yet regarding the said proposal. What we do know is, should the excise tax exemption be removed, it could significantly increase the prices of pick-up trucks in the country – affecting the auto industry sales as a whole.
Also included in the proposal is the imposing of excise tax on motorcycles, as well as reforming the Motor Vehicle User's Charge (MVUC). Should all of these proposals come into effect, we could see more rising costs of buying pick-ups, motorcycles, and the annual payment of the MVUC.
All of these tax reforms are part of the DOF's Package 1 proposal which could come into effect sometime in 2023. The DOF also mentioned that the Package 1 reforms “already have existing bills, or have already been sufficiently discussed in Congress”.
“We are optimistic that the incoming administration and our next set of legislators will recognize the importance and urgency of these measures and implement them at the soonest time possible,” said DOF Secretary Carlos Dominguez III.
The DOF expects that repealing the excise tax exemption on pick-up trucks (and imposing an excise tax on motorcycles) will allow the government to collect PHP 19.2 billion. Meanwhile, imposing a single and unitary rate based on the gross vehicle weight (GVW) of all motor vehicles under the MVUC will net the government an additional PHP 38.3 billion in funds.
There is no exact date or timeline yet regarding the new tax reform proposals. But in case you've been eyeing that pick-up truck or motorcycle from a nearby dealership, you might want to think about getting it sooner rather than later.