People should be taxed based on their consumption rather than their income: Diokno
Governor Benjamin Diokno of the Bangko Sentral ng Pilipinas (BSP) believes that taxing individuals based on their consumption is preferable to taxing them based on their income.
Diokno reaffirmed his previous position on the subject in a Laging Handa briefing on Friday, October 8, 2021, stating, “It’s preferable to tax individuals on the basis of what they take away from society, consumption iyon (that’s consumption), rather than what you give to society, which is your income.”
He remarked, “So maganda talaga ‘yung value-added tax,” alluding to the efforts to tax digital transactions and the wealthy.
The House of Representatives passed House Bill 7425 on final reading last month, imposing a 12 percent VAT on digital transactions in order to increase government income.
Diokno said that legislators are currently pressing for this legislation, but that it is preferable to exempt small-value transactions from this bid in order to encourage people to utilize digital means for their financial transactions.
“In general, I believe VAT is a good tax, but iyong mga little transactions, say, less than PHP500, ay i-exempt natin sa Value Added Tax (In general, I believe VAT is a good tax, but tiny transactions, say, less than PHP500, are excluded from VAT),” he added.
The BSP has been pushing the use of digital transactions, which grew in popularity during the epidemic as a result of the government’s mobility restrictions.
It aims to raise the proportion of digital transactions to 50% of all transactions by 2023, up from about 20% in 2020.
This aim is supported by a number of initiatives, including the expansion of payment operators that provide electronic financial services and the reduction of transaction costs.
Under its National Retail Payments System, the BSP has implemented two electronic payment systems: PESONet and InstaPay (NRPS).
PESONet transactions reached approximately 31.6 million in the first half of 2021, up 164 percent year on year, according to monetary officials.
Similarly, InstaPay transactions increased by 223 percent to 201 million over the same time period.
PESONet is currently offered by 87 financial institutions, whereas InstaPay is offered by 55 financial institutions.