Finance Secretary Carlos G. Dominguez III has suggested that the government should consider increasing taxes on real-estate properties instead of imposing the wealth tax.
“I’m against wealth tax,” Dominguez said at a virtual forum by Financial Executives Institute of the Philippines (FINEX) on Tuesday, Feb. 22, citing such measure would encourage aggressive tax avoidance schemes and drive out capital and investments from the Philippines.
“Just look at the experience of some European countries, what happened particularly in France? I had a very good friend who was a quite wealthy person in France. What happened? They take tax on wealth. You know what he did, he brought it to Switzerland,” Dominguez shared.
If implemented, Dominguez warned that wealth tax would defeat its purpose of generating more revenues.
However, the finance chief has also offered an alternative to this tax proposal now pending in the House of Represenatives.
Increase the “lot tax,” Dominguez said, referring to a real property tax (RPT) or commonly known as “amilyar” levied on the value of the real property a person owns.
“However, that is not a national tax that is a local tax. And that depends on number one, how you assessed the tax. And number two, the value of the tax. That is the kind of thing you can tax because nobody can hide them,” he said.
Earlier, the Bureau of Local Government Finance (BLGF) reported that the share of RPTs to local tax revenues has been decreasing since the enactment of the Local Government Code.
Currently, RPTs contributed nine percent to local tax revenues, lower than business tax collections that accounted for 13 percent of total local government units (LGUs) aggregate income.
“Local governments are in the best position to implement and real effective wealth tax which is tax on real estate. And yet it does not get done because local mayors and provincial governors do not want to be kicked out of office,” Dominguez said.
Data from the BLGF showed that as of 2019, around 98 out of the 146 cities and 46 out of the 81 provinces in the country were non-compliant with the requirement to revalue properties in their respective jurisdictions once every three years.
Moreover, 64 percent of LGUs have outdated property valuations, with the RPT collection efficiency of provinces and municipalities at only 68 percent, and provinces, only 71 percent.
“That should be addressed. That's why we made that proposal part of our tax reform. Package three, basically to say that, let's assess property in accordance with with international standards,” Dominguez said.