BIR rules out deduction for stores honoring senior, PWD discounts
THE Bureau of Internal Revenue (BIR) said retailers who plan to honor the expanded discounts planned for senior citizens and persons with disabilities (PWDs) have no legal basis at the moment to claim tax deductions.
Speaking at a consultation organized by the Department of Trade and Industry (DTI) this week, Ron Mikhail Uy, representing the BIR, said: “We cannot give additional (tax deductions) without basis in the law. As of now, that is the stand of BIR.”
Agencies including the DTI are currently drafting a joint administrative order (JAO) increasing the discount entitlement for seniors and PWDs purchasing basic necessities and prime commodities (BNPCs).
Mr. Uy said the current laws governing such deductions are Republic Act (RA) 9994 and RA 10754, which outline specific requirements for deducting items from gross income.
Under Section 4 of RA 9994, or the Expanded Senior Citizens Act of 2010, establishments may only claim the discounts granted under subsections A and C as tax deductions based on the cost of the goods sold or services rendered.
Subsection A of Section 4 grants seniors a 20% discount and exemption from value-added tax on the sale of goods and services such as medicine, hospital fees, medical supplies, fares, hotel, lodging, restaurant meals, theater admissions, and funeral services.
Meanwhile, Subsection C of Section 4 governs the 5% discount on water and electricity supplied by public utilities.
“This has already been suggested and discussed with the technical working group of the Ways and Means of the Congress to add the deductibility of the 5% discount under BNPCs,” Mr. Uy said.
Officer-in-Charge and Assistant Director Cherryl G. Carbonell of the DTI’s Consumer Protection and Advocacy Bureau (CPAB) said that the department has already proposed to include the 5% discount as tax-deductible in a bill that aims to harmonize all the discounts.
“As of now, we are still trying to work it out, but really, there is no legal basis in the law. That is our status right now,” Ms. Carbonell said.
Steven T. Cua, president of the Philippine Amalgamated Supermarkets Association, Inc., told BusinessWorld that without deductibility, “retailers will have to resort to jacking up the prices to accommodate this expanded privilege accorded to a few.” He questioned why the private sector needs to bear the burden for “privileges extended to 10% of the population.”
“The government is trying to tame inflation yet comes up with proposals that are inflationary in nature, as the extension of discounts adds to the retailer’s cost of operations,” he added.
He said judging from the BIR’s input, he doubted the CPAB’s ability to make progress with the effort to make the expanded discounts deductible.
Last month, Speaker Ferdinand Martin G. Romualdez announced plans to make seniors and PWDs eligible for a P500 discount each month on BNPCs, starting in March.
The proposal will entitle seniors and PWDs to a special discount of 5% on their BNPC purchases, not to exceed P125 per week, with no carrying over of unused amounts.
Asked about how much retailers might raise prices in response to the proposal, Mr. Cua said: “Pricing is a management decision; it is a strategy to (be) competitive. It really depends on the many factors considered by the concerned outlet,” he said.
“Do they want to please their owners and retain the same earnings? Do they see it as a chance to eat into its neighbors’ market share and delay an increase in prices? How much earnings are currently affected by the purchases of SCs and PWDs at a particular store? In the final analysis, sooner or later, stores will have to adjust their margins,” he added.
The DTI, Department of Agriculture, and Department of Energy plan to publish the JAO on the additional discounts within the month, which will be effective immediately.