Experts Say That Increased Tax on Luxury Items Cannot Fully Address Inequality Gaps

Economists are saying that the proposed increase on taxes for luxury goods can potentially raise government revenues but additional discal features are needed to address the gap of inequality in the country.

Recently, President Ferdinand R. Marcos Jr. supported a bill that expands the rate of tax on luxury goods or nonessential items from 20% to 25%.

“This may generate incremental tax revenues, but the reality is that the government still requires additional structural revenue reforms to finance spending necessary to reduce scarring (from the pandemic),”  mentioned  Renato E. Reside, Jr., a professor at the University of the Philippines School of Economics.

Chairman of the House Committee on Ways and Means Rep. Jose Maria Clemente S. Salceda had stated that increasing taxes on luxury goods could raise over ₱15 billion in revenue for the government.

Emy Ruth D. Gianan, an economics professor at the Polytechnic University of the Philippines, has mentioned that a higher tax rate on luxury items would only affect those willing to spend.

This luxury tax as stated by Gianan can expand the government’s tax base.

“If our goal is to just increase government revenues, this would already help,” she adds.

Rep. Salceda has mentioned that the luxury tax proposal was made to answer calls from international organizations calling for wealth tax imposition in the Philippines.

“But a wealth tax is necessary if the government is working towards a more transformative and equitable society,”  she adds.

Source: Business World