INCREASING CAPITAL GAINS TAX, ET AL – NOT A GOOD IDEA, ACTUALLY

By Mark Ferry John A. Lamsen, 16 January 2025, 03:46 pm

 

Last December 2024, Finance Secretary Ralph G. Recto proposed, among others, increasing the capital gains, estate and donor’s taxes to 10% (from its present rate of 6%), with a sunset provision of Year 2030 unless extended by the government.

 

Given the actual moves on the street, I don’t think this will help increase revenue collection in the long run, honestly speaking.

 

You see, taxpayers frown upon any idea of increasing tax rates. Yes, our economy will benefit from increased tax payments by its citizens and businesses, but it actually broods a lot of creative ideas to AVOID them. Let’s be frank and honest about this matter – the more the government presses for more taxes, the more effort the people will exert to avoid them.

 

Best example – buying properties. Instead of declaring actual cash purchase, buyers and sellers will have to declare a lesser amount of purchases on the deeds of sale so they can pay lesser amount of taxes. Since taxes on property sales are based on specific rates which they can no longer control, what they can control is the amount of sale written on the sales contracts so as to save on taxes. Government tax personnel won’t have any idea if the declared value is the actual sale amount or not; they will just be focused on what’s declared on paper.

 

If the government plans to increase its revenue collection efforts, burdening people with higher taxes is NOT the way to do it. There is ONE BEST solution for this – make this country business-friendly! Simplify business registration, allow more foreign ownership on select industries that will not affect national patrimony, establish more incentives even to local entrepreneurs in exchange for more transparent sales reporting, allow up to 99 years of land lease to foreigners on lots not classified as agricultural (so as not to affect local food supply), clearly establish one single code for land classification for the whole country, allow tourism-related improvements to local tourist spots and lastly, STOP CORRUPTION in all aspects of business operations and registrations, at ALL levels of the government!

 

If the government will do all these, expect a robust economy like that of Singapore – IF AND ONLY IF the government will indeed all these. Honestly, I don’t expect much, so I have lukewarm response to this increase in certain taxes.