THE Department of Finance (DOF) is looking to impose steeper taxes on luxury cars and other high-end goods to raise additional revenues.
“The current tax system does not impose higher tax burden to luxury items and other non-essential goods, resulting in equity gap and untapped revenue potential,” DOF Fiscal and Policy Planning Director Johanna Hortinela said during a stakeholders briefing on the proposed ProGRESS bill on Wednesday.
The proposal will “generate additional revenues from luxury and non-essential goods consumption to support government priority programs and public services,” she added.
Under the Promoting Growth, Revenue, and Equity toward Socio-Economic Sustainability (ProGRESS) bill, vehicles priced above P8 million will be subjected to a 75-percent tax rate.
The proposal also seeks to raise the excise tax on non-essential goods from 20 percent to 25 percent and broaden coverage to include private aircraft and recreational or private vessels such as jet skis, speedboats, sailboats and motorboats.
Hortinela said the reforms were intended to enhance “equity and progressivity by imposing higher taxes on discretionary, high-value consumption while minimizing the direct impact on lower-income households.”
Under the proposed structure, automobiles with a net importer’s or manufacturer’s price of up to P600,000 will continue to be taxed at 4 percent.
Those priced above P600,000 up to P1 million will also remain subject to a 10-percent rate, while those priced above P1 million up to P4 million face a 20-percent tax.
Vehicles priced above P4 million up to P8 million will be subjected to a 50-percent tax and those worth more than P8 face a 75-percent rate.
For non-essential goods, the expanded coverage is expected to allow the tax system to capture more high-value discretionary consumption while generating additional revenues.
“The reform is anchored in the principle of vertical equity, which recognizes that taxpayers with different levels of economic capacity should bear different tax burdens and those having greater ability to pay, contributing a larger share,” Hortinela said.
“So by increasing taxes on luxury automobiles and non-essential goods, the reform better aligns the tax burden with differences in consumption capacity while minimizing the impact on essential goods and more affordable consumption,” she added.
Hortinela said they had yet to calculate the potential additional revenues from the tax reforms, but noted P307 million in excise taxes on non-essential goods was collected last year.
The government is also proposing to implement a global minimum tax for large multinational enterprises.
The proposed global minimum tax will require large multinationals to pay a 15-percent effective tax rate, with the Philippines collecting a top-up tax where the effective rate on covered profits falls below 15 percent.
Finance Assistant Secretary Euvimil Nina Asuncion said the global minimum tax could generate about P24.4 billion annually in additional revenues.
