Financial transaction

Pickup truck prices to rise as House approves excise tax

Vans will soon become more expensive, as the Lower House Ways and Means Committee on Wednesday, August 24, 2022 approved an expanded bill that imposed excise taxes on this segment of commercial vehicles.

Removing the excise tax exemption for pickup trucks was among additional measures the Department of Finance (DOF) lobbied this week for inclusion in what was previously called the taxation of passive income and financial intermediaries (Pifita).

In the past, Pifita was touted as a revenue-neutral capital markets tax reform measure, which meant that the government would not levy additional taxes once it was enacted; however, the bill approved by the House committee is now expected to generate additional revenue of 18 billion pesos next year and 7.9 billion pesos in 2024, before collections decline from of 2025.

The committee also approved the proposed mining tax regime, which Deputy Finance Secretary Valery Joy Brion said will add a total of 37.52 billion pesos in tax revenue to government coffers. The measure will impose a 5% royalty on all large-scale mining operations in the country, plus a 10% export tax on the gross value of minerals, in addition to handing over a minimum “fair” government share on industry revenue.

“Heavy” tax bill

During Wednesday’s hearing, House Ways and Means Committee Chairman and Albay Rep. Joey Salceda read a letter sent by Finance Secretary Benjamin Diokno last Monday urging him to adopt a version “improved” from Pifita.

In addition to reducing the number of tax rates on passive income and financial intermediaries to 52 from the current 74, the DOF has proposed to simplify the system through uniform and harmonized corporate tax rates, including on bonuses health maintenance organizations, life insurance, retirement and provident products. .

The DOF also proposed adopting a tax on stock market transactions, a streamlined documentary stamp tax on financial transactions, as well as a clarification of the taxation of collective investment schemes.

While vehicle taxes were not part of Pifita, the DOF lobbied for other tax administration provisions of the unsuccessful Duterte administration’s comprehensive tax reform program, such as the one on the tax on vans.

“In conjunction with the Department of Trade and Industry (DTI), we are proposing the inclusion of a provision removing the excise tax exemption for pickup trucks introduced under Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (Train) Act. Pickups have been given special tax treatment for their usefulness as workhorses for small business owners and professionals in their livelihoods,” Diokno’s letter to Salceda reads.

However, Diokno said the DTI has observed that “manufacturers are modifying pickup trucks to serve as passenger, recreational or sport utility vehicles.”

“This system allows manufacturers to circumvent the supply of the [Train] the law and the purpose of the exemption,” Diokno said.

The DOF had estimated that additional tax revenue would reach 52.6 billion pesos from 2022 to 2026 if the excise tax was applied to pickup trucks.

In turn, the House Ways and Means Committee approved these additional measures proposed by the DOF.

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