Finance Secretary Carlos Dominguez III cautioned lawmakers against passing a bill that would slap more taxes on billionaires or individuals with assets exceeding P1 billion, as this may drive out capital and investment from the Philippines.
The Department of Finance (DOF) said Dominguez wrote a letter to House Speaker Lord Allan Velasco, saying that House Bill (HB) No. 10253 would defeat its purpose of generating more revenues.
The DOF said that while the proposed wealth tax might initially lead to gains in tax collections, it could discourage growth and investments in the long haul.
“There is a risk of capital flight if the wealth tax is passed in the Philippines. Currently, only four countries continue to implement the wealth tax –Belgium, Norway, Spain, and Switzerland. Many countries that had wealth taxes before ended up repealing the said measures particularly because of the increased capital mobility and access to tax havens in other countries,” Dominguez said.
HB 10253 proposes that individuals with taxable assets exceeding P1 billion pay a 1% tax, while a tax of 2% would be imposed on those with taxable assets over P2 billion, and 3% for over P3 billion.
“Philippine taxation for the longest time has been largely collected from what people pay for, what they consume, or from what they earn, and [has] never implemented a tax on large fortunes,” states the bill.
The bill estimates that wealth tax would generate P236.7 billion per year, but the DOF projects only P57.6 billion in revenues, while losses incurred from other taxes are far more substantial.
Dominguez also insisted that the bill is not consistent with the goal of the Corporate Recovery and Tax Incentives for Enterprises Act, which reduced corporate income tax to bring in more foreign capital.
Dominguez said existing provisions of the Tax Code and the Local Government Code already provide some form of wealth tax through estate and real property taxes.
“Existing literature regards real property tax as a perfect tax because land, in particular, being a capital asset, is visible and immovable, which is an important fiscal tool in this time of globalization and competition,” Dominguez said.
According to the 2021 Forbes’ Philippines Rich List, the collective wealth of the 50 richest Filipinos grew 30% to $79 billion (around P3.9 trillion) despite the COVID-19 pandemic. – Rappler.com