MANILA, Philippines — Proposals to impose a luxury or wealth tax are off the table, according to Finance Secretary Benjamin Diokno, who says it will not effectively raise the country’s tax collection.
During Thursday’s House committee on appropriations hearing on the proposed 2024 national budget, Nueva Ecija Rep. Ria Vergara asked Diokno about his opinion on imposing luxury taxes.
“Right now there’s nothing in our proposal for such a tax. When you propose a tax, one characteristic, one property of a tax is that it should give you a high yield and the administrative costs should be fairly minimal,” he said.
Diokno pointed out that if a diamond, for instance, will be taxed, the government is “practically not going to collect anything because that’s easy to hide.”
It is also more likely that consumers will just go abroad to buy goods subject to luxury tax locally.
“So you have to consider all these things, the simplicity of the tax, how easy it is to avoid and things like that,” he added.
Also responding to Vergara, National Economic and Development Authority director general Arsenio Balisacan had a different opinion and acknowledged that “income inequality” in the country is high.
Balisacan underscored that what is “more disturbing” is the inequality in economic opportunities.
“I think that’s what we should be looking at more closely. And when I say income inequality, opportunity is about access to health, access to education… livelihood, access to housing,” he said.
He also has a different opinion on luxury tax as he admitted being in “favor of taxing goods that create congestion.”
“Why can’t we tax pollutive services, for example, or utilities. Why don’t we tax luxury vehicles that you know can add to the problem of traffic and many things like that that we can think about,” he added.
Meanwhile, Diokno said that the Department of Finance is currently reviewing the value added tax (VAT), which he described as “one of the highest in this part of the world, yet its yield is very low.”
He underscored that the government collects only 40 percent of what VAT is supposed to generate.
According to him, VAT is “pro-poor” because food in its “original state” are exempt from the tax. In other countries, these are also being taxed.
He cited the vegetables and meat in the public market and grocery stores.
But when the food items are bought in a restaurant, for instance, VAT already applies.