Finance Secretary Carlos Dominguez said there is no risk of capital flight once the government pushes through with its plan to slap a higher tax rate of 35 percent on high-income earners or the so-called ‘ultra rich.’
MANILA, Philippines – Finance Secretary Carlos Dominguez said there is no risk of capital flight once the government pushes through with its plan to slap a higher tax rate of 35 percent on high-income earners or the so-called ‘ultra rich.’
“It’s not really a big concern,” Dominguez told reporters.
Newly-appointed Finance Undersecretary Antonette Tionko agreed, adding that the additional three percentage points is “not that much” of an increase from the current highest individual tax rate of 32 percent.
The plan, which will be included in the tax reform package to be submitted to Congress, will see only “less than 1,000 people” getting affected, according to Bureau of Internal Revenue data cited by Tionko.
This will easily cover the bureau’s top 500 individual income taxpayers, which included businessmen and celebrities led by Jacinto Ng of Rebisco Corp. and now Senator Manny Pacquiao.
In that year, the two paid P280.11 million and P210.31 million in income taxes at a rate of 32 percent.
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Local businessmen were also in the list, including San Miguel Corp. president Ramon Ang, Ayala Corp.’s Jaime Augusto Zobel de Ayala, and Metro Pacific Corp. chief Manuel Pangilinan.
“I really don’t think they would mind paying a higher tax rate since they are also earning more,” said Benedict Tugonon, president of industry group Tax Management Association of the Philippines.
“Besides, some other countries also charge almost the same rate,” Tugonon said.
At 35 percent top rate, the Philippines will match those charged by Thailand and Vietnam to their citizens, according to Department of Finance data. China’s highest individual tax rate is pegged at 45 percent.
In Thailand, yearly earners of 4 million baht or more should pay the highest levy. Converted into pesos, that amounts to around P5.4 million.
Most high-income earners are also charged with final tax, not income tax, on their earnings such as dividends, Tugonon said.
Going down the proposed tax brackets, Tionko said those who earns P3 to P5 million would still enjoy the present rate of 32 percent.
“Actually, it is not that much. If you look at the difference between P3 million and P5 million, how much is that, about three percent? That is only P60,000 which isn’t much if you earn P5 million,” she explained.
Tionko said those making P250,000 and below every year will have a lower rate, which she did not specify. Currently the lowest rate of five percent is charged to those getting less than P10,000.
Since the bigger cap would cover more taxpayers, Tionko said the DOF is also proposing doing away with deductions to “simplify” the tax process.