Billionaire tax: Why the Philippines must fix tax collection first
The debate over taxing the ultra-rich has reached Congress, but the real question isn't just about rates. It's about whether the government can actually find the billionaires, verify their wealth, and collect what's owed. Before creating another tax, we need to build a tax system that works.
House Bill No. 9274 proposes annual wealth taxes of 1% on net assets above ₱1 billion, 2% above ₱2 billion, and 3% above ₱3 billion. Making the rich pay more is a fair goal. But without modern tax administration, this could become another classic Philippine reform: good on paper, weak in practice.
What the BIR data really tells us
The most telling number isn't the proposed 3% rate. It's 97.55%.
According to the Bureau of Internal Revenue's 2025 Annual Report, ₱3.03 trillion, or 97.55% of total collections, came from voluntary payments. Preliminary and final assessments contributed only 2.33%, while delinquent accounts added 0.12%.
This doesn't mean audits don't matter. Tax audits deter evasion and protect honest taxpayers. But the data shows where sustainable revenue truly comes from: voluntary compliance backed by credible enforcement.
The OECD reports similar patterns globally. Additional assessments from audits averaged about 3% of collections among reporting tax administrations in 2023. Modern tax agencies don't fund governments by auditing everyone. They use information, risk management, and targeted enforcement to encourage voluntary compliance.
What the Philippines can learn from other countries
Several nations have kept wealth taxes and made them work. Switzerland integrates wealth taxation with annual income tax reporting and established asset valuation systems. Norway applies combined wealth tax rates around 1% at higher levels with valuation discounts for shares and operating assets. Colombia, a more relevant emerging market example, made its wealth tax permanent with rates from 0.5% to 1.5%.
The lesson isn't to copy them. Wealth taxes work best when government can see, value, and verify wealth. That's where Philippine institutional reform must begin.
Building a modern revenue administration
The Philippines needs a revenue agency that is fiscally autonomous, professionally managed, and politically insulated, with strong internal controls and accountability. It should integrate tax returns, beneficial ownership, property, securities, major asset acquisitions, and legally accessible financial information to build verified profiles of high net worth taxpayers.
Forbes is useful for headlines. It is not a tax database.
Bank secrecy must also evolve. It should protect legitimate privacy, not unexplained wealth, tax evasion, money laundering, or corruption. Reform must come with strict access rules, digital audit trails, confidentiality safeguards, and severe penalties for abuse.
Following the evidence wherever it leads
Objective, risk based scrutiny should follow the evidence, including to public officials, politically exposed persons, political families, major campaign donors, and government contractors when declared lawful income is materially inconsistent with accumulated assets.
That is not political persecution. The best protection against weaponized taxation is an independent institution applying transparent rules and due process regardless of who holds power.
Our decades long struggle to recover ill gotten wealth should have taught us another lesson: once assets disappear behind nominees, corporations, and layered transactions, recovery becomes far more difficult. Government should detect unexplained wealth early, not decades later.
Protecting legitimate wealth while taxing the rest
Tax policy must distinguish legitimate wealth from ill gotten wealth.
An entrepreneur who builds a multibillion peso company, creates thousands of jobs, attracts investment, and pays the correct taxes is not the problem. Developing economies need successful businesses, deeper capital markets, and more investment. Tax policy should distribute the fiscal burden more fairly, not destroy the productive wealth that creates jobs.
That's why Congress should carefully model a recurring tax as high as 3% of net wealth. Start with a genuinely ultra high threshold. Consider moderate marginal rates. Provide tightly designed rules for productive but illiquid assets. Close artificial debt and beneficial ownership loopholes. Then measure actual collections, investment effects, and administrative costs.
The World Bank likewise emphasizes transparency, beneficial ownership information, international information exchange, and advanced data analytics as foundations of stronger domestic revenue mobilization, especially in developing economies.
So, should billionaires pay more?
Yes. But first build a government capable of finding the real billionaires, and distinguishing wealth created through enterprise from wealth accumulated through corruption or tax evasion.
Collect better before taxing more. Tax verified wealth, not headlines. Modernize tax administration. Protect legitimate investment. Follow unexplained wealth wherever it leads.
Otherwise, we may create another tax that looks progressive on paper, while the truly rich and powerful remain beyond its reach.
Mon Abrea, CPA, MBA, MPA (Harvard), is a global tax policy expert and Chief Tax Advisor of Asian Consulting Group (ACGlobal). He advises governments, multinational enterprises, and international organizations on tax policy, investment competitiveness, and fiscal reform. He is the author of Reimagining the World Without Corruption and Why Invest in the Philippines? CREATE MORE Edition, and has represented the Philippines in policy dialogues at the OECD, World Bank, and other international forums.