FILTHY RICH PEOPLE who used to pay less taxes on their fancy private aircraft and vessels would soon be slapped with staggering excise taxes while those with cars worth P8 million or more will have to shell out 75 percent equivalent of the luxury ride.
This was announced recently by the Department of Finance at the stakeholders briefing on the proposed “progress bill” by Director Johanna Hortinela of the DoF’s Fiscal Policy and Planning Office.
Hortinela said the DOF is proposing to increase the non-essential goods tax to 25 percent from the prevailing 20 percent.
Private aircraft, including planes, jets and helicopters, and recreational vessels such as jet skis, speedboats, sailboats and motorboats, are also being eyed for inclusion among taxable non-essential goods.
“The proposed changes aim to strengthen the equity and progressivity of the excise tax system and generate additional revenues from high-value discretionary consumption,” Hortinela said.
The current system leaves an “equity gap” because luxury and other discretionary goods are not taxed at levels commensurate with their value or the purchasing capacity of their buyers, she explained.
In addition, the DOF wants to add a new tier in the existing excise tax rates on automobiles by imposing a 75-percent tax rate on vehicles with a net importer’s/manufacturer’s price of P8 million and above.
In response to a query of former BIR Commissioner Kim Jacinto-Henares why the P8-million threshold was chosen, Hortinela said it was based on market data showing that high-end vehicles in the Philippines are generally around that price level.
Hortinela said the DOF is open to raising the current tax rates on vehicles priced lower than P8 million also upon being asked by Henares why these goods would only face lower tax rates instead of the “big” 75 percent.
The DOF is also considering expanding the list of non-essential goods covered by the measure, as the agency previously thought of imposing taxes on luxury watches, designer bags and paintings but eventually narrowed the initial proposal to high-valued commodities, Business Mirror quoted Hortinela.
“[These are] still part of what we are studying. We will consider everyone’s opinion and comments on [proposals for non-essential goods], Hortinela said.”
The revenue impact of these measures is still being assessed by the DOF. In 2025, the government collected P307 million from excise tax on non-essential goods, down by 28 percent from P426 million in 2024.
DOUBLING USER CHARGES
The DOF also proposed adjusting the motor vehicle users charge (MVUC), with existing rates set to increase by 109 percent as the rates have remained the same since 2004.
Under the proposal, the MVUC for a light passenger car would increase to P3,344 from the current P1,600, while the charge for trucks would rise to P6,170 from P2,952.
The proposed adjustment would cover all types of motor vehicles, including private, government and for-hire vehicles.
“Remaining stagnant for over two decades, these rates have suffered severe inflation erosion, diminishing the real value of revenues,” Hortinela said, noting that the rising cost of road maintenance justifies the adjustment.
The estimated average cost of preventive maintenance for national roads increased nearly sixfold from P4.5 million per kilometer in 2007 to P27.6 million per kilometer in 2022, she said.
But MVUC collections only more than doubled from P8.3 billion in 2007 to P18.6 billion in 2022.
Adjustments in the MVUC are expected to generate an estimated P22.39 billion in incremental revenues annually from 2027 to 2030.
These proposed tax changes form part of the DOF’s “Progress Bill,” a new comprehensive tax reform package, aimed at providing tax relief for the middle class and small businesses while expanding sin taxes.
The measure is projected to raise P518.71 billion in revenues from various excise and wealth taxes from 2027 to 2030, offsetting P326.92 billion in losses from personal and corporate income tax relief.