‘Higher taxes on rich to turn off investors’

MANILA, Philippines — Finance Secretary Benjamin Diokno is not keen on supporting proposals to slap higher tax rates for the wealthy, saying such a move might scare away potential investors.

The measure is being pushed amid the need for the government to raise much needed revenues and trim the budget deficit.

But Diokno said that in designing a tax system, it should have a higher yield at the least cost for the government.

“When you say tax the wealthy, how much will you really collect from that? I suppose that is an extra tax, higher than the personal income tax,” he said.

“Some of the taxes are difficult to collect, like with personal income tax, it is more difficult to collect than the value-added tax. What you need from that is self-declaration,” he noted.

Diokno warned that taxing the rich may drive investors away, at a time when the economy needs as many resources as possible to drive growth.

“You might turn off many of these people. Those who want to enter the Philippines might think twice about doing so. That kind of effect, so you have to weigh all of these factors,” he said.

Last week, Sen. Sherwin Gatchalian, who is poised to chair the Senate ways and means committee, said he is looking at increasing the contribution of the rich following the concept of progressivity.

“Everyone has the responsibility of contributing to nation building, and if you have a bigger capability of contributing more, then that should be looked at,” Gatchalian said.

Asked if such a measure would be supported by lawmakers, many of whom belong to wealthy families, Gatchalian said yes.

Diokno said that the government needs to weigh the administrative cost of collecting taxes from the rich.

“How many billionaires do we really have? How much are we talking about? Can we really collect that, and how much resources are we going to spend?” Diokno said.

“There might just be leakage on that, or it might look like some harassment for the rich. So you have to think of all of these things,” he said.

Asked whether the government would not support any measure on taxing the rich, Diokno did not directly answer and simply stated that taxes should be “appropriately designed.”

He noted that only seven countries have slapped a wealth tax: Spain, Norway, Switzerland, Belgium, Argentina, the Netherlands and Italy.

Earlier estimates from research and advocacy group IBON Foundation showed that the government stands to gain some P470 billion if a wealth tax is imposed.

IBON argued that rich people, especially billionaires, can easily afford a small wealth tax with no impact at all on their welfare.