Louis Vuitton tax

Albay Rep. Joey Salceda has filed a bill in Congress that aims to impose a tax on certain luxury items that some ultra rich Filipinos often indulge in.

Dubbed the “Louis Vuitton tax” (a pun on the internationally known French luxury fashion house that sells highly priced products), the proposed tax would apply to, among others, wristwatches, bags and other leather goods that cost more than P50,000; luxury cars worth over P5 million; and beverages priced at least P20,000 per bottle.

According to Salceda, the tax shall be in addition to the excise tax, value-added tax (VAT) and other taxes usually levied on those items. It would enable the government to collect at least P12.4 billion in additional revenues.

At present, a 20-percent tax is imposed on the wholesale price of jewelry (whether real or imitation), precious stones, perfumes and toilet waters.

He said the higher tax take may enable the government to lower the VAT presently imposed on other products.

In a manner of speaking, it’s a Robin Hood-like concept of stealing from the rich to give to the poor.

In a TV interview, an official of the National Economic and Development Authority had said that tax was easier to implement because the subjects of the tax were visible and that, unlike a “wealth tax,” would not require the amendment of other revenue laws which could be difficult.

As presently drafted, the bill meets what are generally considered as the elements of an effective tax law, namely: first, it is progressive because it is direct in character, i.e., outrightly imposed on the taxpayer or cannot be shifted to any other party; second, equitable as it is based on the taxpayer’s ability to pay; and third, capable of effective administration because the items are visually verifiable and, most importantly, have paper trails.

From a rational perspective, there should be no reason for Filipinos whose net worth or disposable income has nine or more zeros to complain about the extra tax load because they can afford it.

An additional, say, 25- or 30-percent tax on their high-value sources of ego trip or social gratification should not cause them sleepless nights or otherwise force them to make adjustments in their lifestyle.

That amount would just be a drop in their financial bucket or, to use a Filipino saying, “patuka sa manok” (chicken feed).

Besides, paying that tax would give them the opportunity to enjoy some degree of “psychic happiness” with the thought that their profligate spending habit in these times of economic hardship would be an opportunity to contribute to the national coffers that the government can use for public purposes.

It’s like a vice being transformed to a virtue.

What’s more, the bragging rights over that benevolent act could make them the darlings of the rarefied world of the country’s social or economic elite.

But making that Louis Vuitton tax a reality is not going to be a walk in the park. It faces enormous social and political challenges.

While the bill may be able to breeze through the House of Representatives’ ways and means committee which Salceda heads, there is no assurance it would have easy sailing in plenary or even get to that stage.

The uber rich Filipinos who stand to be adversely affected by that tax may not like the idea of their conspicuous spending habits being unduly burdened or the breadth of their spending spree reduced.

They may not stand still and let Salceda’s brainchild reach fruition if they can help it.

Historically, any legislative proposal that tends, directly or indirectly, to disturb the status quo in the proverbial 1 percent of Philippine society always meets stiff opposition from that sector.

For one, this was proven in the failure of the past Duterte administration to have the scope and coverage of the bank secrecy and antimoney laundering laws amended despite it having the majority in the two chambers of Congress and the international watchdog on financial frauds strongly lobbying for the amendments.

It bears watching whether that political clout would be wielded in the deliberations on the proposed Louis Vuitton tax. INQ

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