Seniors to lose VAT exemption

The Department of Finance (DOF) plans to rationalize the present consumption tax system in the country by removing unnecessary goods and services currently exempted from the value-added tax (VAT).

Finance Secretary Carlos G. Dominguez III said the government will not raise the 12-percent VAT, but would limit the benefits currently being enjoyed by individuals, including senior citizens.

Under the expanded Senior Citizen Act of 2010, all elderly Filipinos, whether rich or poor, are exempted from paying the VAT on their purchases of goods and services, which Dominguez noted as “unfair”.

The finance chief, who is a senior citizen himself, believes exempting elderly people from paying VAT, but could afford to eat at luxury restaurants, is unfair to other people living in poverty.

“If I go by a meal that is P1,000, I get a subsidy of P120 because I don’t pay the VAT,” Dominguez said. “Now, is that fair to [another senior] guy who needs the P120, but he doesn’t have to money to pay an expensive meal?”

Dominguez assured that food, like fresh vegetables, meat, fish and rice, along with medicines, and education will remain VAT exempt, other goods and services deemed non-essential for senior citizens, like luxurious lifestyle, will be slapped with VAT.

“We want it to be fair. Why should I or she be subsidized [by the government] when that guy cannot get it [because he has no financial means to be able to afford it]?,” Dominguez said.

The Duterte administration was considering the removal of the exemption granted to senior citizens and persons with disabilities (PWD) from the VAT to cover for revenue losses from cutting individual and corporate income taxes.

The proposal is part of the tax reform plan, which the finance department will submit to Congress by September.

“The whole structure of the tax reform is to make sure that we have enough funds to make the necessary investments in infrastructure, education, and in health,” Dominguez said. “You have to balance. You have to make sure that you have the revenues in order to reduce poverty.”

“We have to drive this economy by investments in infrastructure to create jobs, and make opportunities available,” he added.

But still, the finance chief assured that the Duterte administration will enhance the government’s efficiency in collecting taxes by cleaning up corruption in the Bureau of Internal Revenue (BIR) and the Bureau of Customs.

“We will raise probably one-third of the revenues by improvements in tax administrations,” he said. (CSL)