Think-tank IBON Foundation has called on 2022 presidentiables to support a wealth tax on the richest Filipinos to increase the government’s spending power as the country reels from the impact of the COVID-19 pandemic on the economy.
Once enacted, IBON believes that money raised from the tax may be used to fund social services instead of resorting to loans and spending cuts.
By imposing a 3-percent tax on the wealth of the richest 1 percent of Filipinos, the next administration might be able to cut the Philippines’s outstanding debt which has already reached nearly P12 trillion as of November 2021, IBON Executive Director Sonny Africa said during the 2022 IBON Yearstarter Birdtalk forum last January 25.
While some candidates have already touted their ambitious economic platforms, such as labor leader Leody De Guzman’s plan to invest in social services and Vice President Robredo's promise of doubling the agricultural budget to 3.4 percent from the current 1.7 percent, Africa said that no one has yet explained how they would fund their proposed economic reforms.
“During the budget season, wala nang kinahantungan yung mga pangako ng mga nagdaang presidente nung kampanya kasi wala namang pagkukunan ng pera para ipatupad yung increase na gusto nila,” Africa said.
The country’s top 50 richest individuals alone own a combined P4.1 trillion total worth of wealth, according to Forbes. These individuals, comprising 0.005 percent of the total population, are richer than the 71 million or two-thirds of Filipinos belonging to the lower and middle-income brackets, an IBON analysis showed.
Should a wealth tax be implemented, the government could collect P467 billion from the richest Filipinos who currently keep 40 percent of the country’s wealth according to IBON’s estimates. The amount would be enough to fund a stimulus package proposed by IBON which includes P180 billion for a P10,000 financial aid to 18 million poor Filipino families and P200 billion for agricultural subsidies.
The proposed wealth tax can also be used to propel the country’s economy, as strict lockdowns have left the Philippine economy at its weakest state since the post-war era. The country has recorded a 4.5 annual inflation rate, the highest in Southeast Asia in 2021, while 7.3 million Filipinos lost their jobs during the first lockdowns, resulting in an all-time high of 17.6 unemployment rate in April 2020.
To respond to the country’s current economic conditions, the Makabayan Bloc filed House Bill 10253, or the Super Rich Tax Act last September 2021, seeking to tax individuals whose wealth exceeds P1 billion. Currently pending at the committee level, the measure would allocate 60 percent of the revenue collected from the new tax to health care, while the rest will be used for education and housing programs.
However, out of all the 10 presidential candidates, only De Guzman and Robredo have publicly said they are “open” to implementing a billionaire tax. On the other hand, Sen. Manny Pacquiao promised that he would even cut corporate income tax from 25 percent to 15 percent, while the remaining candidates have yet to disclose their stand regarding the proposed wealth tax.
“Siguro yung masasabing legacy ng Duterte administration, in terms of their economic policies, ay mas yumaman yung mga malalaking negosyante habang yung burden para magbayad ng mga utang para sa mga infrastructure projects at tax cuts para sa mga bilyonaryo ay nasa mga ordinaryong Pilipino,” Rosario Guzman, head of research for IBON, said.
Corporate tax rates fell from 30 percent to 25 percent, and would gradually dwindle to 20 percent by 2027 with the passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law last March 2021. Due to CREATE, the Department of Finance projected that the government would lose P249.4 billion worth of revenue by the end of 2022.
The finance department has also warned that a wealth tax could “discourage” economic growth. But IBON said that it was “not surprising” that Duterte’s economic managers, who crafted the Tax Reform for Acceleration and Inclusion and CREATE Laws, would cater to the needs of the large corporations in the country.
In the incoming elections, Africa stressed that one of the best “litmus tests” in choosing the country’s next leader is to determine who among the presidentiables are ready to go up against the billionaires’ political machinery, and reform the tax system that has long favored the wealthy.
“Any discussions about the platforms of candidates should come from the realization that the past 40 years of economic policies have failed to deliver,” Africa said. “It may seem na we may not get the structural changes we want this election, but we should vote for someone who can implement the first steps toward that.” ●
