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Monday, March 4, 2024

Taxing the rich

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Instead of a wealth tax, why not impose higher taxes on luxury goods frequently bought by the very rich?

That’s the proposal of Albay 2nd District Rep. Joey Salceda, an economist and chairman of the House Ways and Means Committee.

The proposal is contained in a bill he filed seeking to expand the list of non-essential goods and increase the taxes on these goods.

The list is extensive, and perhaps makes the merely rich have second thoughts about buying them. But not the ultra rich, who will not mind spending their money on luxury goods.

Here’s the list made by the lawmaker: (1) wristwatches worth more than P50,000; (2) bags, wallets, and belts worth more than P50,000; (3) sale of residential properties above P100,000 per square meter (provided that the threshold shall be adjusted annually based on the housing consumer price index);

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(4) beverages above P20,000; (5) paintings above P1 million, sold by persons other than the artist; (6) antiques worth more than P100,000 per item; (7) automobiles whether brand new or second hand above P10,000,000; and (8) private aircraft and parts except those for use by the Philippine government or airlines and logistics companies.

According to House Bill 6993, the tax rate for these non-essential goods will increase from 20 to 25 percent.

This measure, if approved, will amend Section 150 of the National Internal Revenue Code which imposes a tax rate of 20 percent on jewelry, perfumes, and yachts based on the wholesale price or the value of importation used by the Bureau of Customs in determining tariff and customs duties, net of excise tax and value-added tax.

Salceda believes his bill is the easiest way to tax wealth through conspicuous or luxurious consumption and through taxation of immovable assets, such as land.

Consumption taxes can be imposed at the point of importation or sale, making them easier to enforce, while 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 the 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.

In July last year, Sen. Sherwin Gatchalian, now chairman of the Senate Ways and Means committee, said he was looking at increasing or adding more taxes on wealthy individuals to generate more government income.

But as of now he has yet to file a bill on the issue.

Even earlier, in September 2021, the Makabayan bloc in Congress already filed House Bill 10253, which would require those with over P1 billion taxable assets, or the “super rich,” to pay one percent of the total amount, those with over P2 billion to pay two percent, and for above P3 billion, three percent.

This amendment to the National Internal Revenue Code of 1997, they said, would provide the government over P236.7 billion by taxing just the 50 richest Filipinos.

Moves to tax the super rich in this country proceed from the stark reality that there now exists a huge gap between the rich and the poor.

Closing the gap will not be easy, but the first steps must be taken—and soon.

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