House committee want pick-up buyers to pay excise tax

Earlier this year, the Department of Finance (DOF) proposed raising taxes in order to help pay the country’s enormous debt. The agency laid out plans to defer personal income tax reductions, expanded the Value Added Tax (VAT), impose charges and taxes on gaming (casinos), and place an additional excise tax on single-use plastics and on luxury goods.

But what really caught our eye was the DOF’s proposal to repeal the excise tax exemption on pick-up trucks. No exact details have been revealed yet but should the excise tax exemption be removed, the price of pick-up trucks will significantly rise in the future.

Fast forward to August 2022, and the House Committee on Ways & Means has just approved an expanded bill that would impose an excise tax on pick-up trucks. During a hearing held yesterday, Committee Chair and Albay Representative Joey Salceda read a letter sent by DOF Secretary Benjamin Diokno.

Here, Diokno voiced his concern that automakers are able to take advantage of Republic Act 10963 (AKA the first phase of TRAIN Law) that was approved by then President Rodrigo Roa Duterte. While most vehicles saw an increase in prices, pick-up trucks were given special treatment since they are seen as workhorses for small business owners and young professionals.

However, Diokno stated that the Department of Trade & Industry noticed that pick-ups are not typically used in this fashion. Instead, they are mostly treated as passenger vehicles or as SUVs. With it, Diokno mentioned in the letter that “this scheme allows manufacturers to circumvent the provision of the law and tax exemption. This resulted in the House Committee approving the aforementioned measure to impose an excise tax on pick-up trucks.

Should the expanded bill be approved and become law, pick-up trucks could be levied with the same excise tax under TRAIN for other vehicles based on the NMISP or Net Manufacturer's Importer's Selling Price; basically, it's the wholesale price or how much the manufacturer or importer sells the car to dealers.

This means any pick-up with an NMISP at PHP 600,000 or below will get slapped with a 4% excise while those costing above PHP 600,000 to PHP 1,000,000 will get a 10% excise. For trucks being sold to dealers at PHP 1,000,000 to PHP 4,000,000, a 20% tax excise will be levied while models with an NMISP of PHP 4,000,000 and above will be slapped with a 50% excise. Keep in mind that all this is based on the NMISP of the vehicle and not the SRP.

There is no mention yet if single-cab pick-up trucks will be exempted still like in the original form of the TRAIN law. Still, if this measure actually becomes law, pick-up trucks, especially fully-loaded variants will become significantly more expensive. Moreover, it could affect the auto industry bouncing back after years of low sales.

On the other hand, the DOF estimated that the government would be able to collect an additional PHP 52.6 billion from 2022 to 2026 if the measure to impose an excise tax on pick-ups will be approved.