THE Department of Finance (DoF) has ruled out a new tax on luxury goods this year, saying it is focusing its efforts on passing the remaining tax reform legislation, particularly the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), which has been repositioned as tax relief for businesses hurting from the pandemic.
Finance Assistant Secretary Antonio G. Lambino II said there is no immediate plan to reintroduce luxury taxes in the Comprehensive Tax Reform Program (CTRP).
“Not that I know of. We are focused on CREATE when the session resumes as well as Packages 3 and 4 for the rest of the year. We will study, of course, the various proposals filed in Congress… and will make ourselves available to legislators for providing available data and analytical support,” Mr. Lambino said via Viber.
Representative Jose Maria Clemente S. Salceda of Albay, who chairs the House Committee on Ways and Means, expressed support for a luxury tax, pending an effective system to prevent leakages.
“In terms of promoting equity, luxury taxes do elevate general welfare — this is a well-proven economic observation,” Mr. Salceda said in a Viber message.
“We favor luxury taxes, but we need very strong tax administration measures to ensure that we are able to collect them. Otherwise, we will just widen the tax gap,” he added.
Mr. Salceda said luxury taxes are progressive, though luxury spending itself may be dampened because of the uncertain economy.
“We just have to study which luxuries in particular will be worth the effort, since luxury consumption is also depressed during economic crises. They are very progressive taxes, and if we can find luxury goods worth taxing, I prefer luxury taxes over broad consumption taxes,” he said.
In its initial form, the CTRP of the Department of Finance proposed taxes such as higher duties on luxury cars and jewelry if there is a need to “augment” tax revenue.
Tax collections in the six months to June dropped 16% year on year to P1.15 trillion.
CREATE lowers the corporate income tax to 25% this year from 30% currently, while overhauling the fiscal incentive system. The other tax reform measures are a bill simplifying the tax structure for investment instruments; and a single framework for real property valuation and assessment.
Last year, the National Tax Research Center said expanding the coverage of the excise tax to more non-essential goods will redistribute income, improve the tax system, curtail conspicuous consumption, and raise more revenue for the government.
House Bill No. 5445 was filed in the 17th Congress to widen the coverage of the 20% excise tax on non-essential goods as well as imposing an additional 2% ad valorem tax on the sale of certain real properties worth at least P5 million and on shares and memberships in clubs and resorts.
However, the bill did not make it through committee while other tax bills were consolidated to form part of the recently-signed “sin” tax law, Republic Act No. 11467. — Beatrice M. Laforga