I'm hooked into the Youtube Channel Gary's Economics where he discusses insights and need for taxing the wealthy as well as the future for the middle class. It's mostly from his observations in the UK economy but I've tried to see how the concepts can also be applied to the Philippines due to a long standing problem with oligarchies running the economy. I checked any previous efforts for laws that tax the super wealthy and the opposition behind.
Disclaimer:
These are just my opinions and I'm not an economist.
In taxing the super rich in the Philippines, the House Bill 10253 states that individuals with taxable assets that exceed P1 billion should pay a 1 percent tax. The Department of Finance Secretary made a statement about the bill in this article "DOF says ‘super-rich tax’ bill to lead to capital flight, tax avoidance".
A fiscal deficit implies that the government's income isn't enough to cover the expenses so government makes up for it by taking in debt from international fund sources or from the private sector. The private entities fund the government's spending and the government owes them money. The government taxes their citizens to pay back these loans.
The Philippines has the highest Value Added Tax in ASEAN and yet asking the common folk on whether this tax rates translated to better public services, the answer is no.
Philippines' VAT is highest in Asean and yet government fails to provide even the most basic services due to its citizens most of the time.
— Mac Zamora (@MackinleyZamora) August 24, 2024
We're not actually a poor country but we have the worst voters who keep on electing corrupt politicians. pic.twitter.com/gMsTgfmA1o
The personal income tax [PIT] rate can go as high as 35% but these rates depend on how much the individual earns arranged in brackets. Not only do we get taxed from PIT, we also have to deal with VAT in our daily living expenses and years after this law was implemented, people don't seem to feel any changes as consumer confidence has been steadily trending negative while the taxes remain constant or high.
In an ideal setting, the taxes are supposed to be designed fair where those that earn more get proportionally taxed. But it seems these changes don't really put a dent on the super wealthy because these individuals, while getting taxed for earning billions, can still hire lawyers and accounts to mitigate their taxes, an advantage a regular citizen doesn't have.
I used working under a high income profession, note used to be because at the time of this writing I'm just an unemployed physician blogging for kicks, my profession gets me ranked 5th to 6th spot on the top most paid jobs in the country. And yet I never felt anywhere near wealthy as people think I do. It's probably from the concept that the term super wealthy is so beyond reach for the common folk that they can't imagine there is a sky beyond the sky they see. The super wealthy in the country aren't people that need to work day jobs for a living, they can just exist and indulge in luxury as they please while still passively earning the value some high income earner works for their whole lives. These are people that have generational wealth and accumulated assets enough to get the government to owe them and by proxy, us common folks pay them to use their assets indirectly via taxes.
I don't usually travel but when I do, my world expands exponentially at the insights I gather. I'm living in the province that is slowly trying to be a great capital in the country but when I visited the business hub in Manila, it was there that I can start appreciating how much my world was smaller than I originally thought. Beyond the towering skyscrapers were businesses and people who can look down at the people at the bottom and I'm just a country bumpkin walking along the sidewalk taking it all in. The world is amazing and it's even amazing when you get to see in action what you can only imagine from literature or see on screen.
Anyway, the point is, there are efforts to tax the super rich like Governments urged to impose a 2% minimum wealth tax on billionaires but we just can't get it done easily due to how much bureaucracy one bill needs to go through to sooth various conflicts of interests.
For politicians and those appointed in key positions of the government, there is an incentive to not tax the super wealthy because some of them are the super wealthy, have allies that are super wealthy, or are far removed from the plight of the middle class to see how making the super wealthy wealthier makes the rest of the country miserable. It's in their best interest to not make a lot of super wealthy enemies and political enemies while in position while providing a lip service that they are serving the best interests of the people.
I may not understand this opposition's point but if one requires to loosen some bank secrecy laws to have a grasp of the total amount of wealth to be taxed, wouldn't that be a necessity considering the most affected by these changes are the ones that have the wealth to hide? not the common folk struggling to make ends meet or the middle class which have less assets in their name to begin with.
Another point was raised like how trying to audit the super wealthy would cost the government a lot of resources to monitor both in the legal and accounting front that it was too costly to keep up due to the super wealthy having the resources to mitigate and hide their taxable assets. I see this as admitting, yeah it's far easier to tax the poor and middle class but we can't really intimidate the wealthy ones because they got a lot of stuff to count and places to hide.
The risk of capital flight is also real, as the super rich can be mobile with their finances opting not to provide the government funding for the fiscal deficit and moving their businesses elsewhere which may cause job loss in favor of countries with less tighter tax policies. I don't have a concrete solution on how taxing the super wealthy without passing the burden to the middle and lower class, but I think it would require targeting the taxable assets the super wealthy has.
I mean, how much revenue can the government really generate from the lower to middle class if they zeroed in on the taxable assets? these classes don't have a lot of assets to begin with.
There is an incentive for the people in power not to tax the super wealthy.
Thank you for your time.