outbrain
Close  

Higher taxes on luxury, ‘non-essentials’ pushed

By: - Reporter / @bendeveraINQ
/ 04:07 AM December 25, 2019

The state-run National Tax Research Center (NTRC) is backing proposals in Congress to slap excise taxes on more luxury and “non-essential” items just as most of the Philippines’ neighbors in Asean do.

The luxury and non-essential products that tax think-tank NTRC was referring to include high-end real properties; memberships and shares in exclusive clubs and resorts; mobile and smart phones as well as other handheld gadgets such as tablets; big refrigerators and television sets; home theater, videoke machines and video game consoles; whirlpool bathtubs and jacuzzis; expensive wrist watches; works of art such as antiques, paintings and sculptures; private aircraft; golf and polo sets; water sports equipment; musical instruments such as pianos, drums, electric guitars and organs as well as amplifiers, speakers and synthesizers; leather goods; textiles made of fur and wool; sporting, hunting and target-shooting rifles; automobile accessories; chandeliers; exercise equipment; cosmetic surgeries as well as e-cigarettes, among others.

ADVERTISEMENT

“The proposed expansion of the coverage of non-essential goods subject to excise tax … can be justified on the following grounds: it has the potential to redistribute income as it is based on ability to pay; it improves the tax system as it captures income that might otherwise escape the income tax net; it curtails conspicuous consumption, and it raises additional revenue for the government,” the NTRC said in a report.

The NTRC’s study titled “Feasibility of Expanding the Coverage of Non-Essential Goods Subject to Excise Tax Under Section 150 of the National Internal Revenue Code (NIRC) of 1997, as Amended,” noted that under the Tax Code, jewelries, perfumes and toilet waters, as well as yachts and other water vessels used for pleasure or sports were to be slapped 20-percent excise tax based on importation value or wholesale price.

FEATURED STORIES

“These were the only items subjected to an additional excise tax when the government shifted from the sales tax to the value-added tax (VAT) system,” the NTRC said.

The NTRC nonetheless urged caution in determining products regarded as “luxury” or “non-essential.”

“In developing countries, the most basic of amenities such as electricity, air transportation and certain clothing can be subjectively deemed as luxuries. Likewise, luxury items such as cellular mobile phones may not be a welcome inclusion to the general public considering that mobile phones have become better alternative to landline telephones especially to low income groups who find it difficult to maintain the high cost of landline services. The imposition of a 20-percent ad valorem tax on this article could further increase the price of cellular phone mobile units. Thus, it is acceptable that a threshold amount should be set on when to consider a cellular mobile phone a luxury instead of a necessity,” the NTRC noted.

“Further, the introduction of a tax on luxury or affluent consumption, as well as expansion of the coverage of non-essential goods subject to excise tax could discourage the purchase of certain luxury or non-essential goods from local businesses and potentially impact negatively on the sales and profits generated by such businesses,” it added.

The idea behind a luxury tax or an affluent consumption tax and the expansion of the coverage of the excise tax non essential goods is to get the wealthy to contribute a bit more toward economic growth and development, NTRC said. However, it warned that the imposition of such taxes as well as the inclusion of certain items in the list of non-essential goods could cause the sharp decline in the sales of these particular items, which could cause problems for the local producers of luxurious or non-essential items and retailers, so much so that they have to lay off employees or cut back on the production of these items.

ADVERTISEMENT
Subscribe to Inquirer Business Newsletter
Read Next
EDITORS' PICK
MOST READ
Don't miss out on the latest news and information.
View comments

Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.

TAGS: Business, taxes
For feedback, complaints, or inquiries, contact us.


© Copyright 1997-2020 INQUIRER.net | All Rights Reserved

We use cookies to ensure you get the best experience on our website. By continuing, you are agreeing to our use of cookies. To find out more, please click this link.