THE SUPREME Court (SC) has affirmed the legality of several provisions of Republic Act (RA) 9257 or the Expanded Senior Citizens Act of 2010 and RA 9442 or the Magna Carta for Disabled Persons, pertaining to discounts that drug stores wanted to remove.
This served as the valedictory ruling of Associate Justice Bienvenido Reyes, who hangs his robes and retires from the judiciary today, Friday, his 70th birthday.
In the Reyes ponencia, the full court or en banc junked the petition for review on certiorari assailing the decision dated June 17, 2011, and resolution dated November 25, 2011 of the Court of Appeals, which dismissed the petition for prohibition filed by Southern Luzon Drug Corp. against the Department of Social Welfare and Development (DSWD), the National Council on Disability Affairs, the Department of Finance and the Bureau of Internal Revenue.
The firm, which operates Mercury drug stores, sought to prohibit the implementation of Section 4(a) of the Expanded Senior Citizens Act and Section 32 of RA 9442 that amended the Magna Carta for Disabled Persons, particularly the granting of a 20 percent discount on the purchase of medicines by senior citizens and persons with disability (PWDs), and treating them as tax deductions.
By law, a senior citizen, who must be at least 60 years old, may avail himself or herself of privileges such as the
20 percent discount on the purchase of medicines. To recoup the amount given as discount, establishments can claim an equal amount as tax credit that can be applied against income tax payments.
The Expanded Senior Citizens Act modified the tax treatment of the discount granted to senior citizens, from tax credit to tax deduction from gross income, computed based on the net cost of goods sold or services rendered.
On May 28, 2004, the DSWD issued implementing rules for the law. The change in the tax treatment of the discount given to senior citizens did not sit well with some drug store owners and corporations, claiming it affected the profitability of their businesses.
On January 13, 2005, Carlos Superdrug Corp., together with other drugstores, filed a petition for prohibition with prayer for temporary restraining order and/or preliminary injunction, assailing the constitutionality of Section 4(a) of the Expanded Senior Citizens Act primarily on the ground that it amounted to taking private property without just compensation.
On March 24, 1992, the Magna Carta for Disabled Persons was enacted, codifying the rights and privileges of PWDs. Thereafter, on April 30, 2007, RA 9442 was enacted, amending the magna carta.
One of the salient amendments in the law was the insertion of Chapter 8 in Title 2, which enumerates other privileges and incentives of PWDs, including a 20-percent discount on the purchase of medicines.
Similar to the Expanded Senior Citizens Act, covered establishments shall claim the discounts given to PWDs as tax deductions from the gross income, based on the net cost of goods sold or services rendered.
Drug store owners brought the case to the Court of Appeals, but were rebuffed.
In its April 25, 2017 ruling that was released only recently, the high court upheld the constitutionality of the assailed provision, holding that it was a legitimate exercise of police power.
“To reiterate, the subject provisions only affect the petitioner’s right to profit, and not earned profits. Unfortunately for the petitioner, the right to profit is not a vested right or an entitlement that has accrued on the person or entity such that its invasion or deprivation warrants compensation. Vested rights are fixed, unalterable, or irrevocable,” the court said.
At any rate, the court said, the law has penal provisions that give concerned establishments the option to file a case against those abusing the privilege.
Section 46(b) of RA 9442 provides that “[a]ny person who abuses the privileges granted herein shall be punished with imprisonment of not less than six months or a fine of not less than five thousand pesos (P5,000), but not more than fifty thousand pesos (P50,000.00), or both, at the discretion of the court.”
Thus, it added, “concerned establishments, together with the proper government agencies, must actively participate in monitoring compliance with the law so that only the intended beneficiaries of the law can avail of the privileges.”