Monday, December 6, 2021
The Philippines Department of Finance has issued a statement warning against the introduction of a new tax on the super wealthy.
The statement concerns a proposal to impose a tax on the "super rich" – those with assets exceeding PHP1bn. The DOF said the bill would encourage aggressive tax avoidance schemes and drive out capital and investments from the Philippines.
Finance Secretary Carlos Dominguez III wrote in a letter to Speaker Allan Jay Velasco that the tax proposal outlined in House Bill (HB) No. 10253 would defeat its purpose of generating more revenues. 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, he said.
Diminished investments will result in far greater revenue losses and fewer new jobs to help Filipinos recover from the pandemic, he added.
"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 in his letter.
Under HB 10253, individuals with taxable assets that exceed PHP1bn (USD19m) would be required to pay a one percent tax, while a tax of two percent would be imposed on taxable assets over PHP2bn, and three percent for over PHP3bn.
He pointed out that the bill is not consistent with the current thrust of the administration to attract more investments in the country. Already the country has raised the top tax rate, to 35 percent, up from 32 percent, on those with annual income exceeding PHP8m, he pointed out.
While the bill's authors estimate that their proposal will generate PHP236.7bn per year, and the DOF projects a more conservative PHP57.6bn in revenues. Losses incurred from other taxes are far more substantial, it said.