Finance Chief Recto says ‘wealth tax’ is not necessary in Philippines

Finance Secretary Ralph G. Recto is not in favor of a “wealth tax,” saying there are already enough taxes.

“I think we have a lot of wealth taxes also to a certain degree,” Mr. Recto told reporters on the sidelines of an event on Oct. 8.

This is after debt-watch group Freedom from Debt Coalition recently pushed for the imposition of a wealth tax on individuals whose net worth exceeds PHP 300 million.

Mr. Recto said that he is willing to study wealth tax proposals, but said these taxes could be “counterproductive.”

“But I’m telling you, why should you also tax those who are working hard,” he said.

In the Philippines, different versions of a wealth tax have been proposed in recent years but none have been approved by Congress.

In 2022, the Makabayan bloc filed House Bill No. 258, which seeks to impose a 1-3% tax on the “super-rich” or people with net value of taxable assets exceeding PHP 1 billion. It estimated that the tax would raise PHP 236.7 billion annually from the top 50 richest Filipinos.

“We have real property taxes on land and buildings. The more land, the more houses you have, the more tax you get,” Mr. Recto said.

Sought for comment, Freedom from Debt Coalition said the country’s current tax system is regressive, as it relies heavily on consumption taxes than income and property taxes.

“Based on the proportion of income, the poor are slapped higher taxes due to consumption tax,” a representative said in a Viber message.

The group called on the need for a more progressive tax system, citing Article VI Section 28 in the 1987 Constitution.

“Those who have more in life should have more in taxes. To follow this provision [in the Constitution], billionaires must be taxed,” it said.

Meanwhile, IBON Foundation Executive Director Jose Enrique “Sonny” A. Africa said that a wealth tax would not be inflationary.

“Unlike the consumption taxes so favored by the government and economic managers that always add to inflationary pressure at the time of imposition as well as permanently raise the general price level, the billionaire wealth tax already filed and refiled in Congress does not affect inflation or prices at all,” he said via Viber message.

Former Finance Secretary Benjamin E. Diokno had previously said the government prefers consumption taxes over wealth or luxury taxes.

Mr. Africa said countries that impose wealth taxes include Norway, Spain, Switzerland, Argentina, Colombia, Uruguay and Bangladesh.

“Others like France, Italy, the Netherlands, Belgium and Portugal tax more specific wealth like financial assets or real property. Tax rates range from 0.1% to 3.5%,” he added.

Implementing the House’s proposed 1-3% wealth tax could generate at least P500 billion in annual revenues, Mr. Africa said.

“Most of this or around PHP 280 billion will even come from just the 50 richest Filipinos. The impact on them is negligible and just equivalent to stock market, forex or interest rate movements that they easily absorb every day,” he said.

“The Philippines infamously has among the worst income and wealth inequalities in the world. Implementing a billionaire wealth tax will send a strong signal of governance that is serious about social justice and economic progress,” he added. – Beatriz Marie D. Cruz, Reporter