From the Sidelines
By: Ray G. Talimio Jr.
It’s starting to sound like a broken record—tax hikes that are “temporary,” supposedly necessary to rescue the nation’s fiscal health, but more often than not become a permanent fixture of our economic life. The Department of Finance (DOF), now under the leadership of Secretary Ralph Recto, has again reached into the tax toolbox, this time proposing to raise the capital gains tax (CGT) on real property sales from 6% to 10% under the so-called GROWTH bill.
This four-percentage-point hike is projected to take effect from 2025 to 2030, with the promise that it will revert to the current 6% rate unless Congress intervenes to extend it. The DOF estimates that this “temporary” measure will raise a whopping ₱300 billion over five years. But the real question is: At what cost? And more importantly, how many times must we fall for the “temporary” bait before learning that in government, very little is ever truly temporary?
Secretary Recto is not new to this narrative. During his tenure as Finance Secretary under a previous administration, he proposed a similarly “temporary” measure in the form of a 12% value-added tax (VAT) rate—which, of course, remains with us today nearly two decades later. The same reasoning was used then: shore up public finances, spread the tax burden fairly, and assure the people that the measure is only a bridge toward long-term fiscal stability.
Fast forward to today, and the DOF is playing from the same script. The CGT hike is framed as a targeted move against the asset-rich, designed to minimize distortion and spare the poor. But as we examine the potential real-world implications, the burden might once again fall—not on billionaires—but on the very middle class that is already stretched by inflation, lack of accessible credit, and an uneven playing field.
The DOF argues that the current CGT system disproportionately benefits the wealthy, who own vast real estate portfolios and gain from long-term appreciation of land and property. On paper, taxing these gains at a higher rate seems justifiable. But the problem is that CGT doesn’t discriminate between the genuinely wealthy and an ordinary family selling a modest home they inherited or a middle-income worker cashing in on a lifelong investment.
With the proposed 10% CGT, the seller of a ₱2 million property—likely the value of a simple residential lot in many urbanizing towns—will immediately lose ₱200,000 to taxes. That’s money that could have gone to education, reinvestment, or healthcare. Without indexation or graduated brackets, the tax could be just as regressive in effect as it is progressive in theory.
Higher capital gains taxes also reduce the attractiveness of long-term investments in real estate, especially among small-scale investors who rely on property as a secure, inflation-hedged store of value. Property developers may also face slower inventory turnover as buyers balk at higher effective costs, which will likely be passed on from sellers adjusting for their tax burden.
This creates a ripple effect across related sectors—real estate agents, brokers, notaries, construction workers, and local economies dependent on property-related activity. Slower turnover can also affect LGU revenues from transfer taxes and documentary stamp taxes. The DOF may gain in national tax take, but it could come at the expense of grassroots economic dynamism.
The most overlooked victims of this tax hike could be the middle class—roughly 22% of Filipinos—who lack the tax-avoidance tools of the ultra-rich. Wealthier families can shift their assets into corporations, create trusts, or hold properties through shell entities to minimize exposure. The average Filipino family, meanwhile, sells a property out of need: to send children to school, pay for medical expenses, or settle an estate. For them, the 10% CGT is not a tax on wealth but a tax on survival.
In essence, the policy could have the ironic effect of taxing economic necessity more heavily than economic luxury.
We’ve heard it all before. In 2005, VAT was raised to 12% “temporarily.” In 2018, fuel excise taxes were adjusted with the promise of targeted ayuda to shield the poor from price shocks. Now, the CGT increase is being marketed as just another short-term fix. But the Philippine tax system has an uncanny way of never letting go once it takes hold.
Unless sunset provisions are hardwired with automatic expiration—without needing another act of Congress—this measure could easily be extended, or worse, institutionalized. There is also the political risk of future administrations treating this 10% as the new normal and using it as a floor for more hikes.
To be clear, tax reform is necessary. Our tax-to-GDP ratio lags behind regional peers. We face persistent deficits and rising debt. But we must resist the urge to take the path of least resistance—targeting static, visible assets like property—while neglecting more sustainable reforms such as improved collection efficiency through digitalization; anti-smuggling and anti-corruption drives; taxing luxury goods and under-declared wealth; expanding estate tax enforcement; and simplifying procedures for voluntary tax compliance.
Rather than squeeze more from those already paying, why not broaden the base by improving enforcement and cracking down on avoidance?
The DOF’s CGT hike is a classic example of a well-intentioned measure at risk of being poorly targeted and ultimately regressive. If the goal is truly to tax the rich, then exemptions, graduated rates, and strong safeguards must be put in place to protect vulnerable groups. And unless “temporary” is given real legislative teeth—such as automatic reversion clauses without the need for new laws—then we must call it what it really is: a permanent burden wearing temporary clothes.
Let’s not mortgage fairness and equity in the name of fiscal expediency. Not again.
A Note on the GROWTH Bill:
The proposed increase in CGT is part of the DOF’s GROWTH bill (Government Reform on Wealth Taxation and Harnessing of Resources), a new legislative proposal that aims to raise revenues by targeting asset-based taxation. While it is complementary to the Comprehensive Tax Reform Program (CTRP), the GROWTH bill is not officially part of the CTRP’s final package. The last and concluding package of the CTRP remains the Real Property Valuation and Assessment Reform Act (RPVARA), which focuses on standardizing land valuation for better efficiency and equity in local tax administration.
About the Author
Ray G. Talimio Jr. is a CPA and public policy advocate who chairs the MSME Development Council of Misamis Oriental and Cagayan de Oro. He also serves as Co-Chair of the Regional Development Council-X Economic Development Committee. His column “From the Sidelines” appears regularly, offering critical perspectives on policy, governance, and economic reform.
Disclaimer: The views expressed in this column are those of the author and do not necessarily reflect the positions of any organization he is affiliated with.
Photo Credit: PRIMER / Department of Finance (Screengrab)
Sources:
• DOF Briefing on GROWTH Bill, April 2025
• PSA Middle Class Distribution Report
• House of Representatives Committee Notes on RPVARA
