Wealth tax to save the nation

Applicability of the 3 tax measures in PHL

ALL the above wealth tax measures outlined by Oxfam can be considered by the Marcos administration. The first, windfall tax on windfall profits, can be applied to big corporations or industries that have made a killing due to the pandemic and the present stagflationary situation. These would include the big pharma, telco, power and oil companies, including the big importers of critical goods and their partner big retailers-distributors. On the one-off emergency tax.

James Miraflor, a senior FDC economic research analyst and consultant in the 2020 NLC-FDC study, avers that as much as P1 trillion can be raised if an “emergency wealth levy on the top 500 families at 20 percent of their net worth in 2020” is adopted. He explains the math and rationale as follows:

“How rich is the Philippine elite? If the Credit Suisse Global Wealth Databook 2021is to be used as guide, we have, as of 2020, 345 people with wealth that is within the range of P2.5 billion to P5 billion, 217 people within P5 billion to P25 billion, and 34 people with net worth P25 billion and up. If we assume that the 345 people above have an average wealth of P3.75 billion (and therefore a combined wealth of P1.294 trillion) and the 217 people above with average wealth of P15 billion (and combined wealth of P3.355 trillion), given that the richest 34 has P2.93 trillion as per Forbes 2020 data, then we are looking at the richest 626 Filipinos having a combined wealth of P7.48 trillion.

“We can zoom in on the top 500 people to get about P5 trillion in total. If we will manage to tax merely 20 percent of their total wealth, that will amount to around P1 trillion.

“Twenty percent is not too much, considering that the collective wealth of the 50 richest Filipinos grew by 30 percent from 2020 to 2021 despite the pandemic. The rate of wealth growth of the rest of the 450 richest Filipinos is probably close to that. The richest individual as of 2022, Manny Villar, saw his wealth grow by 28.6 percent during that period. Enrique Razon, 2022’s 2nd richest person, saw his wealth jump 43.3 percent. Lucio Tan, who topped the list for decades, had his net worth grow by 94 percent. And this is just in a single year. From 2006 to 2022, Villar’s wealth has jumped 72.73 times. Razon’s net worth grew 30 times during the same period.”

On the institutionalization of progressive taxation system. According to Antonio Salvador, a lawyer and consultant in the 2020 NLC-FDC study, a progressive taxation system would entail the development or institutionalization of wealth tax structure where progressive wealth tax rates on the ascending levels of the accumulated “net worth” of rich individuals or families. The networth refers to the balance after deducting total liabilities from total assets.

But what are the assets of a person

“How rich is the Philippine elite? If the Credit Suisse Global Wealth Databook 2021 is to be used as guide, we have, as of 2020, 345 people with wealth that is within the range of P2.5 billion to P5 billion, 217 people within P5 billion to P25 billion, and 34 people with net worth P25 billion and up. If we assume that the 345 people above have an average wealth of P3.75 billion (and therefore a combined wealth of P1.294 trillion) and the 217 people above with average wealth of P15 billion (and combined wealth of P3.355 trillion), given that the richest 34 has P2.93 trillion as per Forbes 2020 data, then we are looking at the richest 626 Filipinos having a combined wealth of P7.48 trillion.

or family? They include a long list of items: house, real property, real estate, shares of stock, shares in business and partnership, bonds, treasury bills, receivables, trusts, insurance benefits, annuities, jewelry and “other things, tangible and nontangible, that have value.”

Table 1 shows the proposed wealth tax rates for different networth levels, beginning at 2 percent on net worth valued at over P100 million.

Can President Marcos nudge the super-rich and Congress to support wealth tax measures?

THE foregoing wealth tax measures are powerful instruments to save the economy and stabilize society. If enacted, they give the Marcos administration the means to steer the economy out of the raging stagflation crisis while addressing the basic social assistance needs of the CDE classes that elected him into office. He does not have to resort to more borrowings and/or engage in imposing more indirect taxes such as VAT and excise taxes that hurt the poor the most.

The question: is he prepared to embrace these tax measures? If so, is he prepared to sit down with the country’s richest and the members of Congress to convince them on the necessity of having “pro-people tax reforms”?

A win-win approach is to explain to the wealthy that wealth taxes save the poor and the rich alike.