August 28th, 2022
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) wants car manufacturers to explain why pickup trucks should be exempt from excise taxes on automobiles amid the industry’s opposition to the Marcos administration’s effort to make pickup truck sales subject to excise taxes.
“You had four years of tax exemptions on pickup trucks. We project that we have lost at least P38 billion from the pickup truck excise tax exemption, and for what? 98% of pickup trucks are imported, according to the DTI. The average Juan dela Cruz does not have a pickup truck,” Salceda, who chairs the powerful House tax committee, said.
“I’m open to any argument, as debate is the basis of evidence-based policymaking. But I want car manufacturers who oppose this policy to tell me what exactly the basis for an exemption of one line of vehicles is.”
“Pickup trucks emit more carbon dioxide, are more expensive generally than sedans, which are the vehicle of choice for the middle class. According to vehicle statistics, pickup trucks produce at least 15% more emissions than sedans. And sedans pay excise. So, please, tell me why we should uphold the pickup truck exemption.”
The tax exemption on pick-up trucks has been included in Package 4 of the comprehensive tax reform program, which President Marcos carried over as a priority from the Duterte administration.
Salceda said that he is confounded by the statement of car companies that imposing the excise tax on pickup trucks will reduce government revenues as it will “will negatively impact its sales volume thereby reducing revenues to the government.”
“They’re exempt. So, any reduction from zero is zero.” Salceda said.
“Besides, there’s a substitution effect, as was seen after TRAIN. If pickups become more expensive, the consumer will choose what he can afford. A shift from one car segment is a shift to another.”
In a letter to Salceda, Finance Secretary Benjamin Diokno also said that “[s]ubjecting pickup trucks to excise tax will result to an estimated additional revenue of P52.6 billion from 2022 to 2026.”
“So, I really need the economic logic: why should the state, with taxes as its lifeblood, forego taxes on pickup trucks. What is the special societal function? Why should we privilege the 98% imported pickup trucks over sedans?” Salceda asked
Salceda also cited a DTI letter to him, which indicates that as a result of the pickup truck exemption, personal car sales growth diminished from 20% annually to 5%, while sales of pickup trucks increased by 17%.
“I am still open to arguments. But the arguments have to make sense. It can’t be, ‘oh don’t enact this policy because it will reduce our sales and our profits.’ It is not the job of government to assure businesses of profit. Especially for a line of goods that are imported anyway. My job, as Ways and Means chair, is to find revenues, create tax laws that boost gross-value-added, and fund the common good.”
“Why should I exempt, say, pickup trucks, which are imported, when the Vios, the Almera, and the Mirage, some of which are locally made, pay their excise – and are typical family cars? It’s an honest-to-goodness policy question that I am willing to hear answers to from the car sales sector.”
“I wouldn’t even say they are carmakers, in the context of pickup trucks. Car sellers, yes. Car makers? Pickups aren’t made here.”
“Here is my commitment: I will heed the President and his team because their proposals make sense. And my committee will work its hardest to fund the President’s programs with fair tax policies.”