House of Representatives. INQUIRER FILE PHOTO
MANILA, Philippines — Suggestions to tax the country’s billionaires and items that are almost exclusive to rich people have resurfaced during the deliberations on the proposed 2024 national budget, as lawmakers find ways to boost the country’s revenues.
During the deliberation of the proposed P5.768 trillion proposed national budget on Thursday, Kabataan party-list Rep. Raoul Manuel told the Development Budget Coordination Committee (DBCC) that a better way to extract revenues would be to tax billionaires, as it would easily be tracked.
“If I am to think of an efficient and a high-yield tax, I’d like to ask the opinion of our officials regarding a billionaire’s tax, because billionaires in the Philippines are just a few thousands, so the tax we collect from them would really help fund key programs of the government,” Manuel said in a mix of English and Filipino.
However, Secretary Benjamin Diokno — head of the Department of Finance (DOF) which handles the Bureau of Internal Revenue (BIR) — said that high income is an indication of a high contribution to society, and therefore must not be taxed.
“Alam mo (You know) in terms of taxation, we prefer to tax what you consume from society rather than your income, because your income is what you contribute to society. You’re paid higher because your contribution is high — but consumption is what you take away from society. So somebody who doesn’t earn anything but he consumes a lot, he should be taxed,” Diokno replied.
“‘Pag tina-tax mo kasi ‘yong mga (When you tax those who have) high income salary, you discourage great initiative,” Diokno added.
But Manuel maintained that a billionaire’s tax would be good in redistributing wealth among the country, noting that the country’s income per capita data is quite far from the actual income of poor people — indicating that the mean yearly income is just driven upwards by rich people.
“Madam chair, wouldn’t a billionaire’s tax be a form of redistributing income because when we compute our gross national income, usually we use the mean or the arithmetic average. It’s only there that we redistribute our income but in reality, that is hard to attain. So why are we not open to these prospects?” Manuel asked.
“I don’t think that is a progressive measure, when you tax billionaires. Iilan lang ‘yon ‘di ba, and then pampa-pogi lang ‘yon. But then tax yield from a billionaire’s tax is much less than general consumption tax,” Diokno replied.
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Tax the watch
But talks of taxing rich people during the House Committee on appropriations’ hearing actually started with Nueva Ecija 3rd District Rep. Ria Vergara.
In her turn to question the economic cluster, Vergara asked Diokno if it is possible to exempt poor families from paying value added tax (VAT) — calling the tax policy “regressive” as it is imposed upon people from all walks of life despite huge differences in spending capacity.
“I call the [VAT] regressive tax because whether you’re rich or poor, you pay. And so I think it impacts even the people who have less, still have to pay [VAT], and that’s why I was considering a proportional tax where like if you’re in the marginalized sector, you have no need of buying a Rolex,” Vergara said.
“So increase the 20 percent maybe to 25 percent and it’s like the richer people would provide more funds for the country so that we can fund our social services and also help lower our debt,” she added.
Vergara also quizzed Diokno if they are looking at proposing more progressive taxes since VAT and the tax on sweetened beverages would hit everyone, to which the DOF chief answered in the negative.
In response, Diokno said these are not considered because such policies might be easy to avoid.
“For example if you want to tax diamonds, you’re practically not going to collect anything because that’s easy to hide and sometimes when you also try to tax, say luxury goods, people will just go abroad and buy it there. Right? Not here, so you have to consider all these things — the simplicity of the tax, how easy it is to avoid, and things like that?” he replied.
READ: Taxing the rich? Bill seeks expanding list of non-essential goods, increase tax
Diokno also defended the VAT, saying that it is a “progressive” policy since food items in its original form, like raw meat, rice grains, and vegetables are not subjected to taxes. The VAT, he said, comes in when these products are processed and sold as a commercialized item.
He admitted though that they are reviewing it because the government only collects 40 percent of the amount they could obtain.
“Is it possible to say that in your review, for instance you’re from the 4Ps, you would be exempted from the value added tax?” Vergara asked.
“Right now your Honor I think our [VAT] is one of the best in terms of being pro-poor, because we do not tax food in its original state. In other countries it is also being taxed by VAT,” Diokno said.
“But sir if I go to Jollibee, I pay [VAT],” the lawmaker clapped back.
But Diokno maintained that food at restaurants and fast food chains are “not food in its original state”, saying that VAT can be avoided if people buy from markets and cook their own food.
Despite the proposed 2024 budget being higher than the P5.268 trillion in 2023, a huge part of the incoming general appropriations bill — P1.939 trillion — will be allocated to debt payments.
Fiscal deficit, or items not supported by the government’s revenues, amounts to 5.1 percent or around P294.1 billion. These figures have led Albay 1st District Rep. Edcel Lagman to question why the government insists on bankrolling the Maharlika Investment Fund (MIF), when allocations for this initiative may be used to curb debt servicing and fiscal deficit.