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Bane to MSMEs: tax on pickup trucks

Bane to MSMEs: tax on pickup trucks

By Alden M. Monzon, Inquirer Business

The removal of excise tax exemption on pickup truck purchases will negatively affect small-time businesses in the Philippines, according to the local automotive industry.

Chamber of Automotive Manufacturers of the Philippines Inc. (Campi) president Rommel Gutierrez said this to reporters last week, explaining that a reimposition of excise taxes on the sale of this commercial vehicle segment would affect industries other than theirs.

“This excise tax is not just about the auto industry. It’s (also) about the multiplier effect on businesses,” Gutierrez said, noting that these vehicles are being used in the daily operations of many micro, small and medium businesses (MSMEs).

MSMEs account for 99.51 percent of all businesses in the Philippines, according to 2020 figures from the Philippine Statistics Authority, making these the backbone of the country’s economy. Majority of them are engaged in wholesale and retail trade, motor vehicles and motorcycles repair, food services and manufacturing.

“The current setup for excise tax should be maintained because, again, these are really helpful for small businesses,” he said further.

Gutierrez said the Philippines should adopt instead a supportive policy like that of Thailand. In particular, he said the authorities should one-ton pickup trucks, which are often used in farm-to-market roads.

Revenue-generating but…

Gutierrez said the local automotive industry would take a unified stance to push back against the measure being mulled in Congress.

“We are still preparing our position paper and it is good that we have supporters in the Senate and Congress,” said Gutierrez, adding they were looking to meet with lawmakers as soon as possible.

Late last month, the House of Representatives approved the passage of an expanded tax reform bill that contains a provision to bring back excise tax on pickup trucks.

“The excise tax portion is just an insertion. So, I believe they are still focusing on the bill itself,” he added.

The intended reform stemmed from the Department of Finance’s stance that pickup trucks had been granted special tax consideration in the past due to their utility in businesses; but that these vehicles were now being modified by manufacturers to become passenger, leisure or sport utility vehicles.

If legislated into law, the tax reform measure is expected to bring in incremental revenues amounting to P18 billion next year and P7.9 billion in 2024.

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But Gutierrez said the automotive industry was still coping with the imposition of a 12 percent value-added tax (VAT) on specific transactions for registered businesses in economic zones almost a year after it was implemented.

“It really affects the business plan of companies. You have a long-term plan and then all of a sudden, this gets issued out. That changes the plan. So, it’s not good,” the Campi official said.

Gutierrez was referring to a new regulation from the Bureau of Internal Revenue, which took effect in June of 2021 and issued to implement the provisions of Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion Act.

Immediate impact

The Corporate Recovery and Tax Incentives for Enterprises Law provided some relief to that tax provision, saying that local purchases of goods and services could still be under VAT zero-rating if exclusively used in the registered project or business.

Gutierrez added that the impact of the measure was immediate and substantial on their cash flows.