Under House Bill No. 10253, filed by a minority bloc at the House of Representatives, the tax on the country’s richest, estimated to be around P57.6 billion each year could be used to fund for medical assistance, education, employment, social protection and housing for the poor.
Finance Secretary Carlos Dominguez III, himself a very wealthy person, warns that a bill seeking to tax the richest in the country would only result in capital flight, in the long run.
It takes a rich kid to know how the rich thinks.
In a letter to Speaker Lord Allan Jay Velasco, Dominguez said the plan to tax the super-rich could lead to aggressive tax avoidance schemes and drive investments out of the country.
Dominguez said for the short term the government could collect big revenues but the long term would not seem so.
“While this wealth tax could initially lead to gains in tax collections, it could, at the same time, discourage growth and investments in the long haul,” his department said in a separate statement.
House Bill No. 10253 (also known as the Super-Rich Tax Act of 2021) seeks to impose a tax of 1-3 percent on rich people.
Under the bill filed by a minority bloc at the House of Representatives, the tax estimated to be around P57.6 billion each year could be used to fund for medical assistance, education, employment, social protection and housing for the poor.
But some congressmen believe the tax take could be P236.7 billion from just 50 of the country’s richest.
The DoF said lost investments caused by the tax would cut the country’s revenue in the long run and reduce new jobs.
“There is a risk of capital flight if the wealth tax is passed in the Philippines,” Mr. Dominguez said.
Only four countries continue to implement the wealth tax — Belgium, Norway, Spain and Switzerland, he said.
“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,” he added.
Taxing over 2,000 billionaires
Think tank IBON Foundation said the measure would generate P467.1 billion from 2,919 people who have taxable assets exceeding P1 billion.
These super-rich account for 0.003% of the population and control 16 percent of the country’s wealth, it said.
This estimated revenue could fund P10,000 in emergency aid to 18.6 million poor households, subsidies for micro, small and medium enterprises to support a daily wage increase of P100 for three months and hiring additional health workers.
Nongovernment organization Freedom from Debt Coalition has been pushing for a wealth tax to finance the country’s Covid-19 pandemic response.
It said candidates for the national elections should pledge that social development will take up a bigger portion of the country’s budget than debt payments.
Dominguez said the proposed tax would discourage businesses from taking on riskier ventures that could benefit the public.
They will be subject to tax liabilities on the high capital value of their assets while they generate low profits at the start of operations, he said.
“Wealth taxes fail to significantly promote economic equality or create additional fiscal space,” Dominguez said, adding that “net wealth taxes often failed to meet their redistributive goals as a result of their narrow tax bases, tax avoidance and tax evasion.”
He also expressed concerns about enforcement, citing the need to relax the Bank Secrecy Law and develop exchange of information agreements with other countries to assess wealth in the absence of a reliable database identifying the country’s richest.
Tags: #DepartmentOfFinance, #wealthtax, #capitalflight, #billionaires