Wealth tax — cross country analysis and implications for the Philippines
Date
2023-01-10
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Abstract
Wealth tax has been used as one of the policy tools in reducing the deep-rooted problem of wealth inequality. Recently, there has been a renewed interest for its implementation in various countries worldwide, including the Philippines. In this study, we assessed the feasibility of implementing a wealth tax in the country in two parts.
First, we conducted a cross country review on the wealth tax experiences of twenty countries in order to look into the factors that are crucial to the success or failure of
wealth tax implementation and how they apply to the Philippines. Our key findings showed that it would be difficult for the Philippines to attain the necessary standards
for an effective wealth tax implementation, given its current conditions with respect to institutional and political factors. Primarily, strict and reliable enforcement practices (on tax reporting, assessment, collection, anti-avoidance, and anti-evasion) are imperative, but such would be hard to administer in the Philippines, with the observed inefficiencies in our institutions. Another main reason is the political climate in the country, wherein the wealthy have a strong influence in politics and have the tendency to use this influence in pursuing their personal interests. Second, using the available data from the Family Income and Expenditure Survey (FIES) and from the Forbes Magazine, we generated estimates of potential wealth tax revenues, along with respective tax thresholds. We found that the FIES would not be a sufficient data basis for operationalizing a wealth tax in the country because it underestimates the wealth concentration at the higher end. Moreover, wealth
estimation can be improved by collecting direct wealth stock information in addition to the flow variables from the FIES. Ultimately, more accurate and reliable information about wealth is essential to better assess the appropriate wealth tax system for the Philippines.
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Keywords
wealth, tax, inequality