Diokno rejects proposed luxury tax hike

MANILA -- Department of Finance (DOF) Secretary Benjamin Diokno on Thursday nixed the idea of imposing higher tax on luxury items.

Luxury goods are currently subject to a 20 percent tax. 

Responding to questions from Nueva Ecija Rep. Rosanna Ria Vergara during the opening of the 2024 budget deliberations at the House of Representatives, Diokno explained that it is hard to implement and easy to avoid.

"I was wondering, do you have anything on your table that propose like a proportional tax, a luxury tax, a wealth tax? Is that something you would consider?" Vergara asked.

Diokno said the agency had no such proposals.

"When you propose a tax, one nice property of a tax is it should give you a high yield and the administrative cost should be very minimal... For example, if you wanna tax diamond, you're practically not going to collect anything because that's easy to hide," Diokno said.

"Sometimes when you also try to tax a luxury good, people will just go abroad and buy it there... Luxury tax is not part of our proposal at the moment," he added.

Albay Rep. Joey Salceda earlier raised the possibility of raising tax on jewelry, perfumes, and yachts to 25 percent or 30 percent to increase government revenue. 

Marcos earlier said the proposal was "reasonable." 

When asked if the government is considering non-regressive taxes, Diokno revealed they are reviewing the VAT because the government is only collecting less than half of what it is supposed to make from the VAT.

"[VAT here] is one of the highest in this part of the world yet its yield is very low, only 40 percent. We only collect 40 percent of what we're supposed to collect so we are doing a study on the value added tax which is a nice tax to make it more effective and more high yielding," Diokno said.

Diokno also defended the VAT in terms of being pro-poor.

"I think our value added tax is one of the best in terms of being pro-poor because we do not tax food in its original state, in other countries it's also being taxed," Diokno said.