Better to tax luxury goods than the rich, lawmaker says

MANILA, Philippines — Imposing taxes on luxury goods like cars, bags, and other items is more feasible than requiring the super-rich to pay up in large taxes, a lawmaker said on Friday.

In an ANC Headstart interview, Rep. Joey Salceda (Albay 2nd District) said wealth tax would only drive billionaires to run circles around the government, but taxing expensive non-essential goods would require people to “pay for (their) conspicuous tendencies” upfront.

“Because when you tax wealth, [the wealthy] will run. So where will you get the 200 billion? I think it’s very mobile. There’s cryptocurrency. We have a bank secrecy law (that is) one of the strictest in the world. So how can you find that 200 billion?” Salceda said in a mix of Filipino and English.

The lawmaker previously proposed a tax on luxury goods coined as the “Louis Vuitton tax" which, he said, could generate at least P12.4 billion in revenues for the government every year. This proposal includes taxes on beverages above P20,000, luxury watches above P50,000, residential properties above P100 million and more. 

This is a more conservative amount compared to the revenue projections from Makabayan bloc’s “Super-Rich Tax bill” filed in 2021 which estimated at least P236.7 billion can be collected annually from the 50 most wealthy Filipinos.

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But Salceda said the tax on non-essential goods is already a good start and “better than zero” since it is difficult to pin down the assets of the wealthy.

“In the first place, the non-essential goods tax is a very good start and it points us in the right direction in taxing the rich,” the lawmaker added. “And if you study the Philippine political economies since 1946, our most grievous and virtually mortal sin is our inability to tax the rich.”

No longer middle class

Salceda said he is gunning for a 20% flat-rate tax on all luxury goods. Middle-class consumers looking to purchase these highly exclusive items are better off spending their money elsewhere, the lawmaker added.

“The state is telling them, 'Hoy, use that money to pay for tuition in Ateneo. Stop buying (Louis Vuitton).' That’s the message of the state,” Salceda said. “If they are going to save up to purchase these items, that in itself is conspicuous consumption. We’re not punishing them.”

Compared to the tax collection system of other countries in Southeast Asia, Salceda said the Philippines has weak tax enforcement that allows evaders to go unnoticed.

“They have good tax morale. You don’t need to go after them to make them pay. I think the difference is not in the tax rates, but in the tax collection efficiency. We just have more smugglers and tax evaders,” Salceda added.  

Oxfam Pilipinas, an international organization advocating for poverty eradication, earlier said that the number of millionaires in the country has increased by 43.5% since 2012.

The organization also estimated that the net worth of the nine richest Filipinos dwarfs the wealth of more than 55 million or half of the entire country’s population, based on a Forbes list of billionaires in 2022.

READ: Villar keeps richest Filipino title in new Forbes billionaires list