MANILA, Philippines — The Department of Finance (DOF) is pushing for only one kind of pickup truck to remain tax-exempt as it insists on the removal of special excise treatment on all other types.
During the Senate committee on ways and means hearing on Monday, Finance Undersecretary Karlo Adriano said the single-cab chassis would still be exempted from taxes under the DOF proposal.
Based on the Tax Code, a single cab chassis is a motor vehicle with a complete engine powertrain chassis equipped with a cab and with a maximum of two doors and one row of seats.
“These are really the ones used for agriculture, so we will still exempt them. But all others will no longer be exempted,” Adriano said.
This means all other types such as the Toyota Hilux, Ford Ranger, Mazda BT-50, Mitsubishi Strada, Isuzu D-Max, Nissan Navara and Foton Thunder will have their exemption scrapped.
Last year, pickup trucks accounted for about 20 percent of commercial vehicles and 16 percent of total industry sales.
“We are coordinating with the Department of Trade and Industry because the proposal came from the DTI itself,” Adriano said.
The DOF estimates that the removal of the excise tax exemption of pickup trucks under the Tax Reform for Acceleration and Inclusion (TRAIN) Law could provide up to P42.6 billion in additional revenues for the government.
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 become passenger, leisure or sport utility vehicles. This scheme allows manufacturers to circumvent the provision of the law and purpose of the exemption.
During the same hearing, the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) argued that the industry is facing challenges from inconsistent government policies and changing the rules mid-game.
CAMPI president Rommel Gutierrez said that pickup trucks are an important source of automotive sales and supported the industry’s recovery after a 40 percent decline during the pandemic.
“If the exemption is removed, we foresee volume loss in the short run since other vehicle types are not a very close substitute to pickup trucks,” Gutierrez said.
“The industry will lose its growth momentum and impact the automotive value chain,” he said.
As a business tool, Gutierrez said it is important to keep acquisition cost of pickup trucks at reasonable levels. CAMPI data showed that 40 percent of pickup buyers say the vehicles are for business and work purposes.
A total of 73,957 units of pickup trucks were sold in 2023, more than double the 34,686 units before the tax exemption was imposed in 2017.
“When the exemption was given, there was an increase of 100 percent. We see the same trend and this will actually add 20 percent to the selling price of the vehicle in case the exemption is lifted,” Gutierrez said.
Committee on ways and means chairman Sherwin Gatchalian said the move to lift the exemption is to caution the impact of revenue loss under the Passive Income and Financial Intermediary Taxation Act.
The removal of tax exemption was introduced and passed by the House of Representatives. It was not in the original Senate version.
“We understand where the proposal is coming from and why the House included it,” Gatchalian said.
“But we also have to note that once you have given this, it is very hard to take back unless we justify thoroughly and in detail,” he said.