February 8, 2023

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The legislator provides for a taxation of luxury goods

AMID calls for taxing the wealthy, the chair of the House Committee on Ways and Means said Monday the panel is considering imposing taxes on non-essential goods on several lines of luxury goods.

Albay MP Joey Sarte Salceda made his statement in response to calls from international organizations including Oxfam International that the Philippine government was imposing taxes on the country’s super-rich.

The calls were also made as President Ferdinand R. Marcos Jr. departs for the World Economic Forum, where he will address the world’s wealthiest individuals and countries.

“I can’t appeal to any particular segment of the population for what they claim to own. They simply apply for foreign citizenship and transfer their money to other countries that are happy to take them,” Salceda said. “But wealth breeds a lifestyle of luxury – what economists refer to as conspicuous consumption. We can collect taxes on these items because they don’t mind paying for them anyway.”

Salceda refers to Section 150 of the Tax Code, as amended, which currently mandates a 20 percent tax on the price of jewelry, perfumes and yachts.

Lawmakers added that the committee will definitely pass a measure that expands that list.

“But we will discuss which items can generate the most sales with the least effort.”

Salceda said his committee is specifically studying taxation of: wristwatches, bags and other leather goods over P50,000; private jets; luxury cars over 5 million pesetas; the sale of residential properties in excess of P100 million; drinks over P20,000 per bottle; and traded in paintings in excess of P100,000, among other things.

“In general, the point of debate will be what can be broadly considered a ‘luxury,'” lawmakers said. “To me, it’s when an item is out of reach of the vast majority of the population and isn’t needed for any essential function.”

Salceda added that properly valuing property in the country “is also an essential step in ensuring we tax the wealthy appropriately.”

“Instead of taxing highly mobile or moveable capital such as cash, stocks, bonds and other financial instruments, we can tax luxury tangible assets better,” Salceda added. “And we don’t have to create any new taxes because we’re supposed to value these properties correctly anyway.”

Obscene inequalities

OXFAM and its Philippine affiliate found that “The inequality experienced in the Philippines is more pronounced as the top nine Filipinos have more wealth than the bottom half [55 million] the population.”

Salceda agreed that “the level of inequality in the country is obscene”.

“It’s not just about income or wealth. This is also reflected in the concentration of economic power. Of all ASEAN countries, we have the highest business concentration in the hands of a few,” he said. “And it leads to there being a cartel in pretty much every major industry.”

However, Salceda said that “taxing much-needed capital will create more problems than solutions.”

“I want the rich to keep their money in the Philippines and spend it on our development,” the lawmaker said. “Evicting them by taxing highly mobile assets solves nothing for the country.”

Definitely an option

Meanwhile, Salceda said taxes on the rich could lead to lower taxes on the working class.

He said the reforms he’s been pushing for have tended to “deprive the rich of a fairer share and lower tax rates for everyone else.”

Salceda cited the Train Act (Republic Act 10963) and the Create Act (RA 11534) as examples.

He explained that the Train Act raised income taxes for the super-rich but lowered taxes for the rest of the public — about 99 percent of personal income tax payers.

Meanwhile, Salceda said the Create Act reclaimed some of the tax incentives from overgrown or overstretched industries, but reduced corporate taxes on everyone else, especially small businesses.

“If we can collect more excise taxes on luxury items, maybe we can start reducing sales tax [value-added tax] for most other things,” the lawmaker said. “It’s definitely an option — if we can generate enough revenue from the rich’s purchases.”

Previously, the Makabayan bloc resubmitted House Bill (HB) 258, which aims to impose a “super-rich tax” on individuals with net worth over 1 billion pesos.

The bill proposed a tax on the super-rich: a 1 percent tax on wealth over 1 billion pesos; 2 percent on assets over 2 billion pesos; and 3 percent over P3 billion.

The bloc said the proposal will raise 236.7 billion pesos annually from the 50 richest Filipinos alone.