Seniors, PWD may lose VAT exemption

MANILA, Philippines – The administration is eyeing the removal of the exemption granted to senior citizens and persons with disabilities (PWD) from the value-added tax (VAT) to cover for revenue losses from cutting individual and corporate income taxes.

At least two senators have rejected the proposal to take away the exemptions granted to senior citizens and PWDs, which was part of the tax reform package prepared by the Department of Finance.

Senate Minority Leader Ralph Recto, who was among the senators who met with the President and Finance Secretary Carlos Dominguez at Malacañang last Monday night, said that the tax reform package presented by the administration was “very ambitious.”

“There are 10 proposals lumped into five packages. In effect they want five pregnancies, twins per pregnancy, and I think they’re very ambitious. And I said to temper the tax increases. I told Secretary Dominguez to spread it over a longer period of time,” Recto said.

Recto, the principal author of the expanded VAT law, clarified that the administration was not seeking an adjustment in the VAT rate, but rather the lifting of various exemptions granted under the law.

Among the exemptions the administration is looking at lifting are agricultural products in its original state, livestock, export and those granted senior citizens and PWDs.

The laws granting exemptions to senior citizens and PWDs were enacted during the Aquino administration.

“I don’t think you can lift their exemptions. I think some will be very difficult to do. I wrote the VAT law, it took a lot of time for me to write all of that and all those exempted para sa mahihirap (for the poor),” Recto said.

According to Recto, the administration is projecting revenue losses amounting to around P75 billion from the reduction in the corporate and individual income tax rate.

“And they want revenues to cover that reduction plus to earn from it. Mga (approximately) P600 billion. That’s just too high. I don’t think you can do that,” Recto said.

Sen. Joel Villanueva, the vice chairman of the Senate committee on ways and means, also rejected the proposal to remove the exemption from VAT granted to senior citizens and PWDs.

Villanueva said that there were a lot of proposals that he supported such as the tax on sugary beverages, which he is also pushing for.

“We emphasized the need for efficiency in tax administration,” Villanueva said.

“I am happy with the (lowering of) personal income tax because we are overtaxed. What I don’t agree with is the VAT. I personally will not agree to (remove) the exemptions for senior citizens,” he added. 

Villanueva said that he believes the intention of the administration is good but may be somewhat too ambitious.

Sen. Juan Edgardo Angara, chairman of the committee on finance, was not able to attend the meeting but said that he was aware of the proposals of the administration.

Angara said that he believes the administration presented all those proposals with an ambitious target and every intention of negotiating with Congress.

Sen. Richard Gordon said that the proposals presented were doable and necessary in order to cover for the foreseen revenue losses from the corporate and income tax rate adjustments.

There was also an item on real property taxes, which Gordon noted goes to the local government units.

He recalled the tax reform package included tax amnesty, rationalizing of fiscal incentives and removing exemptions from VAT that were not necessary.

“You are going to lower the income tax (rate), where are you going to get the deficiency? The role of the VAT is to rationalize the reduction of the income tax so that we can recover what was lost,” Gordon said.