MANILA - The Department of Finance wants pickup trucks to be subjected to excise taxes.

Among the proposals in Package 4 of the Comprehensive Tax Reform Program is the removal of pickup trucks from the exemption of excise tax on automobiles.

Finance Assistant Secretary Karlo Fermin Adriano said pickup trucks were granted special tax treatment under the TRAIN (Tax Reform for Acceleration and Inclusion) Law for their utility among small business owners and professionals in their livelihood.

“However the Department of Trade and Industry observed that manufacturers modify pickup trucks to serve as passenger, leisure, or sports utility vehicles,” Adriano told a Senate hearing on Monday.

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Under the TRAIN Law, vehicles are taxed based on price. Automobiles worth up to P600,000 are taxed 4 percent of their price, 10 percent for automobiles priced higher than P600,000 but below P1 million, and 20 percent for cars priced above P1 million but below P4 million. Cars worth P4 million or higher are slapped with a 50 percent tax.

Senator Sherwin Gatchalian, vice chairman of the Senate Committee on Finance, meanwhile said the justification for the proposed exemption removal “needed to be presented very clearly.”

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“We want to see the justification on that argument that majority (of pickups) is not being used in agri sector, (that) it is being used for other purposes. So we need to demonstrate that very clearly,” Gatchalian said.

Automakers have been opposing the lifting of the excise tax exemption on pickup trucks.

NEW TAX RATES ON PASSIVE INCOME

Meanwhile, the DOF is also looking at pegging the tax rate on all passive income at 15 percent to simplify administration and encourage compliance.

Under the proposed Passive Income and Financial Intermediary Taxation Act (PIFITA) the tax rate on interest income will be gradually reduced from 20 percent to 19 percent in 2024, 18 percent in 2025, 17 percent in 2026, 16 percent in 2027, and 15 percent in 2028.

The DOF is also proposing harmonizing the tax on dividends with the tax on interest income by increasing the tax rate on dividend income from 10 percent to 15 percent.

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The increase would mainly affect the rich “but they can reduce the tax exposure by diversifying their investment,” the DOF said.

“Basically, all the passive income will be at 15 percent,” Adriano said.

To address the shallow equity and debt capital markets, the DOF is proposing to lower the tax rates on passive income and harmonize the tax treatment between equity and debt.

Gatchalian, who is backing PIFITA, meanwhile said the measure will simplify taxes on passive income.

“There are three words to describe PIFITA – simplify, simplify and simplify. Simplify in terms of understanding the taxation covering the financial industry, simplify compliance from the point of view of taxpayers and simplify tax administration from the point of view of our revenue collecting agencies,” Gatchalian said.

Adriano also said that “there may be some changes in the DOF proposal” given that the agency has a new secretary. President Ferdinand Marcos Jr recently appointed Sec. Ralph Recto as the new Finance chief, replacing Benjamin Diokno.