Taxing luxury goods seen to raise ₧12.4B–salceda
THE House Committee on Ways and Means is eyeing at least P12.4 billion in annual revenues from the proposed expansion of the non-essential goods tax.
House Ways and Means Chairman Joey Sarte Salceda said he is targeting “non-essential goods whose prices are beyond the reach of the bulk of consumers and which are not significant or important inputs to other value-adding industries.”
The economist-lawmaker said his proposed list are luxury watches, luxury cars above P5 million in price, private jets, residential property above P100 million per unit, beverages above P20,000 per bottle and leather goods above P50,000 per unit.
“I’m looking at a short list of additional items in this ‘Louis Vuitton Tax.’ Basically, the aim is to find some way to tax the rich consistent with the constitutional principle of progressivity in taxation. For now, my short list will generate P12.4 billion at least,” he said.
The lawmaker explained that the non-essentials goods tax will be on top of all other taxes.
“The tax on luxury cars, for example, will be on top of the automotive excise tax, which is arguably a pollution and congestion tax but not yet a luxury tax,” Salceda said. “The tax on luxury residential properties will be on top of VAT and other taxes on its sale.”
He added that other items—sales of shares in exclusive membership clubs like the Manila Polo Club, Tagaytay Highlands, etc, jacuzzis, furs, all regatta equipment and antiques— are also being considered.
“But the revenue potential could be limited and enforcement costs could outweigh revenue potential,” Salceda said. He added that increasing the non-essentials goods tax rate to 25 percent or 30 percent on top of expanding the list will generate between P15.5 billion to P18.6 billion in annual additional revenues.
Not in perpetuity
SALCEDA explained that he is also studying how the additional revenues can be “funneled into the country’s creative sectors, particularly our own creators of luxury items. I think it’s time the Philippines becomes more than just a part of the whole assembly of luxury goods.”
The solon said he is looking at the possibility of power cost or labor cost subsidies for companies who can fully design and manufacture luxury bags and other “creative products” in the country.
“I am also looking at infusing the Creative Industry Development Fund with revenues from this new revenue stream,” Salceda added.
Meanwhile, Philippine Chamber of Commerce and Industry (PCCI) President George T. Barcelon said he is in favor of imposing tax on luxury items as this could be “helpful in the meantime” for the challenges that the country is facing.
“Whatever is helpful in the meantime on the challenges that we’re facing, yes, it can be implemented; but it cannot be in perpetuity. There must be a timeline,” Barcelon told reporters on the sidelines of the press briefing of the Joint Venture Agreement between Inchcape Plc. and CATS Motors Inc. held in Taguig City last Wednesday.
The PCCI head stressed that there have to be some “criteria” on the products that will be taxed.
Point of debate
SALCEDA’S proposal to impose nonessentials goods taxes on several lines of luxury items was in response to calls from international organizations like Oxfam International that the nine richest Filipinos have more wealth than half of the country’s population.
Referring to Section 150 of the Tax Code, as amended, which currently imposes a 20-percent tax on the price of jewelry, perfumes and yachts, Salceda said that the committee will definitely pass a measure expanding the list.
“But we will discuss which items can generate the most revenue for the least effort,” the lawmaker said.
Salceda said his committee is particularly studying taxing the following: wristwatches, bags and other leather items above P50,000; private jets; luxury cars above P5 million; the sale of residential properties above P100 million; beverages above P20,000 per bottle; and, traded paintings above P100,000, among other items.
Salceda said the “point of the debate will be what can be universally considered ‘luxury.’” However, he said, “to me, it is when an item is beyond reasonable reach of the vast majority of the population and is not necessary for any essential function.”
Oxfam and its Philippine affiliate noted that “Inequality experienced in the Philippines is starker with the nine righest Filipinos having more wealth than the bottom half [55 million] of the population.” (Full story: https://businessmirror.com.ph/2023/01/17/lawmakerseye-imposition-of-tax-on-luxurygoods/)
Meanwhile, Auto Nation Group Inc. Chief Operating Officer Francis Jonathan C. Ang told reporters in a chance interview last Wednesday, that “we’re lucky to be in the luxury segment because it’s a little bit inelastic compared to the mass market so we’ll have to see what the government’s thoughts are in terms of the additional tax.”