I believe motor vehicle use in Metro Manila and other major cities has now reached an all-time high. Constant traffic congestion, despite the development of new roads and tollways, provides strong evidence of this trend. The current vehicle mix visibly includes more public buses, jeepneys, taxis, transport network vehicles, and motorcycle taxis.
It also appears that since the pandemic years (2020-2022), we’ve experienced a significant surge in public utility vehicular activity. With higher fares being charged, there should logically have been an increase in the government’s collection of the Common Carrier’s Tax (CCT).
Under Section 117 of the National Internal Revenue Code (NIRC), the CCT imposes a 3% tax on the gross receipts of domestic carriers. Operators of public utility vehicles (PUVs) such as jeepneys, buses, and taxis fall under this category. However, I am uncertain about the applicability of this tax to motorcycle taxis, and I understand tricycles are currently exempt.
For transport operators whose annual gross receipts exceed P3 million, a 12% Value-Added Tax (VAT) applies instead. Gross receipts include all fares collected by the operators, regardless of expenses for drivers, fuel, and maintenance.
Data from the Land Transportation Office (LTO) confirms a consistent increase in registered motor vehicles over recent years. In 2023, Metro Manila alone had over four million registered vehicles, suggesting a significant rise in the number of PUVs as well.
Furthermore, fare adjustments approved by the Land Transportation Franchising and Regulatory Board (LTFRB) should also have driven higher gross receipts. The minimum fare for jeepneys in Metro Manila, for instance, increased from P11 to P13. This fare hike, coupled with greater ridership, logically implies higher revenues and, thus, increased CCT collections.
However, I suspect Bureau of Internal Revenue (BIR) reports might reveal a different reality. Despite the evident growth in the land transport sector, I doubt CCT collections have seen a corresponding increase. Reliable CCT data is challenging to obtain, but the potential tax revenue can still be approximated.
Considering jeepneys alone, about 50,000 units operate in Metro Manila. Nationwide, a conservative estimate would be at least 200,000 units, each potentially generating gross receipts of P1,500 daily over approximately 22-26 days per month.
Even if we reduce this estimate to P1,000 daily over 20 days monthly, each jeepney would still earn about P20,000 monthly or P240,000 annually. With 200,000 jeepneys nationwide, gross receipts would total about P48 billion annually. Yet, it’s doubtful operators report even half this amount.
Applying the 3% CCT rate yields potential annual tax revenues of about P1.4 billion from jeepneys alone. If jeepneys alone have this tax potential, significantly more should be collectible from city and provincial buses, taxis, and transport network vehicles. Motorcycle taxis may also contribute if they fall under this taxation.
Expanding the jeepney estimate reveals the vast untapped potential of CCT to generate substantial tax revenues. These funds could be instrumental in financing improvements to public transportation, infrastructure development, and social services.
Given that total percentage tax collections for 2023 amounted to about P50 billion — including franchise taxes and others — it seems clear that land transport operators pay far less than their potential. I suspect the bulk of CCT currently collected likely comes from air and sea transport operators.
This chronic under-collection of CCT is a longstanding issue. Many PUV operators operate informally without proper BIR registration, making tax monitoring and collection challenging. Even registered operators often underreport receipts to minimize their tax liabilities.
The cash-based nature of fare collection facilitates this underreporting. Since jeepneys and city buses typically do not issue receipts and lack ridership tracking, the BIR must rely on operators’ self-reported data.
Additionally, the BIR faces limited enforcement capabilities. Auditing and enforcing compliance across numerous small-scale operators would require substantial resources and staffing. Some operators might also remain unaware of their exact tax obligations.
Addressing these challenges is critical. The government should intensify efforts to formalize PUV operations through simplified registration processes and compliance incentives, particularly under jeepney modernization programs.
Adopting digital fare collection systems can significantly enhance transparency and accuracy in gross receipt reporting, thereby improving tax compliance. Digital systems can also alleviate issues related to coin shortages and making correct change.
The BIR could further invest in building its capacity to monitor and enforce tax compliance through additional staffing, enhanced training, and advanced technological tools. Establishing robust data-sharing systems and coordinated enforcement efforts with agencies such as the LTO and LTFRB would also be beneficial.
Persistent traffic congestion in the Philippines clearly indicates a growing land transportation sector. The sector’s growth and associated fare hikes should naturally lead to increased CCT collections. However, multiple factors hinder effective tax compliance.
To address this, targeted measures could be beneficial. One such measure would involve earmarking CCT collections from jeepney operators specifically for jeepney modernization programs. This approach ensures that jeepney operators directly benefit from their taxes, effectively subsidizing their industry’s modernization.
Another viable option is imposing a presumptive tax — using a standard, predetermined formula or fixed rate — to estimate taxable income or liability. For example, a presumptive gross receipt of P1,000 daily for 20 days monthly equates to annual receipts of P240,000. Applying a 3% CCT yields an annual presumptive tax of P7,200 per jeepney.
Alternatively, a presumptive tax based on seating capacity or average passenger load could standardize revenue per seat annually, ensuring larger vehicles pay proportionately more. This system could apply to jeepneys, taxis, and buses alike.
Another approach is to base the presumptive tax on the “boundary” or rental fees drivers pay their operators, which represents operators’ minimum guaranteed gross receipts.
A presumptive tax simplifies administration in an otherwise difficult-to-audit industry dominated by cash transactions. It can substantially minimize tax evasion, particularly if proof of tax payment is required annually for public utility vehicle registration and franchise renewal.
While presumptive taxes might create fairness issues, with some taxpayers paying more or less than their actual income warrants, and might not fully reflect income variability, the overall benefits may outweigh these concerns.
Given the evident challenges in achieving tax compliance among public transportation operators, particularly jeepneys and possibly tricycles, a carefully designed presumptive taxation system could be a beneficial alternative to the present CCT.
Marvin Tort is a former managing editor of BusinessWorld, and a former chairman of the Philippine Press Council
