Taxing People Based on Consumption better than on Income? Diokno Thinks So

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said that it would be a better decision to tax people based on consumption rather than income.

Expounding more on the concept, Diokno said that it’s better to tax people for what they take away from society, which is consumption, rather than their contributions to society in a Laging Handa briefing Friday.

The BSP chief further added that he advocates for value-added tax (VAT).

This comes as the lower house approved on final reading House Bill 7425, a bill that aims to tax digital transactions at 12 percent VAT.

However, Diokno said that small transactions such as transactions less than P500 may be exempted from the VAT.

The government sees the taxing of digital transactions as a means to generate more revenue as digital transactions have massively grown in the country due to the COVID-19 pandemic, with electronic payment facilities such as PESONet and InstaPay seeing more volume in transactions year-on-year.

PESONet transaction volume grew by 164 percent year-on-year and had a total of 31.6 million transactions for the first half of 2021, while InstaPay transactions increased by 223 percent, with a total transaction count of 201 million. (GFB)