‘Non-essential luxury goods taxes to yield P15.5 billion a year’

MANILA, Philippines — The government stands to collect some P15.5 billion annually if non-essential luxury goods will be taxed, according to House committee on ways and means chair Joey Salceda.

Salceda has filed House Bill 6993, which estimates that the government can generate P15.5 billion annually if the luxury taxes are raised from 20 percent to 25 percent.

The taxes will come from non-essential goods estimated at P62.1 billion. These pertain to luxury watches, luxury cars, private jets, sale of residential properties above P100 million, beverages priced at over P20,000 and leather goods costing above P50,000.

Under the bill, the non-essential goods tax will be on top of all other taxes being collected by the government.

“The tax on luxury cars, for example, will be on top of the automotive excise tax, which is arguably a pollution and congestion tax but not yet a luxury tax. The tax on luxury residential properties will be on top of VAT and other taxes on their sale,” the measure said.

According to Salceda, the “single most crucial flaw of the country’s tax system is its failure to tax the rich” as this “exacerbates inequality and promotes the concentration of financial resources crucial to the economy in the hands of very few individuals.”

To address this socioeconomic condition, the bill recommends the imposition of wealth taxes based on the net worth of so-called “super-rich” individuals.

The bill said that while this is “morally sound, the practical problem with a wealth tax based on net worth is that capital is extremely mobile and many countries offer ‘tax-haven’ passports to extremely wealthy individuals.”

It pointed out that the Philippines has “limited means to track wealth hidden in other countries” as the Senate has not ratified the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which the Philippines signed in 2014.

“This means we cannot invoke automatic exchange of information in tax jurisdictions where we suspect wealth of Filipino super- rich individuals are deposited,” Salceda said.

He also noted that “absolute bank secrecy especially for foreign currency deposits will make enforcement very difficult if wealth is denominated in currencies other than the peso.”

Aside from this, “much of the estimated net-worth is in market-valued financial securities” and their perceived value changes every day.

“The easiest way to tax wealth is through conspicuous or luxurious consumption and through taxation of immovable assets (i.e., land),” he said.

Consumption taxes can be imposed at the point of importation or sale, making them easier to enforce. Also property taxes on immovable assets are difficult to evade.

“An increase in real property tax rates across the board will be painful and counterproductive, but proper valuation of luxury real estate (such as those in gated subdivisions and golf courses) will help increase revenues and make the tax system more progressive,” he said.

These luxury goods pertain to those whose prices are “beyond the reach of the bulk of consumers, and which are not significant or important inputs to other value-adding industries.