Claiming that most of those benefitting from the Value-Added Tax (VAT) exemption for senior citizens are the rich and the middle-class, the Department of Finance (DOF) has proposed to limit the tax break to medicines.
At a hearing of the Senate ways and means committee headed by Sen. Juan Edgardo Angara on Wednesday, DOF Undersecretary Karl Kendrick Chua said they are looking at lifting VAT exemption of senior citizens on non-essentials, which only the rich and middle-class senior citizens can afford to buy.
A proposed tax reform package of the DOF presented during the hearing seeks to remove VAT exemption of senior citizens and people with disabilities (PWDs) on other purchases aside from medicines.
Chua told that committee that by removing the VAT exemption, the government could generate P3 to P6 billion.
He said the current VAT leakage is between P6 billion and P10 billion.
“For senior citizens, we are proposing to retain the exemptions on medicine in our new proposal. We, however, find that the expenses in restaurants, travel air fare, for instance, mostly are [within reach only]by the rich who can afford to pay and go to these restaurants. So we’re proposing to remove the exemption,” Chua told the committee.
The money to be generated from removing the VAT exemption of senior citizens and PWDs he said, could be used to directly benefit the poor and vulnerable among them.
Angara said the DOF should not view the issue as only a “mathematical” issue because thousands of senior citizens are expected to be affected by the proposal.
“It’s an emotionally charged issue, not a purely mathematical issue. Seniors feel it is something they have earned having served for so long. You might not want to spend your political capital there,” he also told the DOF official.
Chua pointed out that they are fighting more for the principle of equity.
“There is also the principle of compassion. One of the reasons [that enabled the President [to come to]power was that people saw other candidates as not as compassionate. He wanted to have more working people have more money in their pockets,” Angara said.
In an interview after the hearing, the senator said there is a need to study the matter thoroughly and hear the position of senior citizens’ groups.
“We will not support something that the sector [senior citizens]do not want to support,” he added.
The proposed law granting VAT exemption to PWDs was signed by then-President Benigno Aquino 3rd last March but it is yet to be implemented because of absence of Implementing Rules and Regulations (IRR).
Under Republic Act 10754 (Magna Carta for Disabled Persons), the Department of Social Welfare and Development, along with the DOF, Department of Health and the National Council on Disability Affairs, shall promulgate the IRR.