Senior Citizen's Acts: Three laws, same disagreements

The long awaited implementing rules and regulations (IRR) of Republic Act 9944, otherwise known as the Expanded Senior Citizens Act of 2010 was signed and released recently. Said IRR was published four months after President Gloria Macapagal-Arroyo signed it into to law on February 10, 2010.

Though we totally agree that the more than 6 million senior citizens of the country should enjoy special benefits and privileges, we can’t help but be amused on the timing of the signing of this and the two previous senior citizens acts. To recall, the first senior citizen’s act (Republic Act 7432) was passed by congress in 1992, a national election year. The second senior citizen’s act (Republic Act No. 9257) was passed by congress in 2003, the following year (2004) was, again, a national election year. Then, early this year (another national election year), congress again passed and President Arroyo signed into law Republic Act 9944.

By its timing alone, it seems that the sheer number of votes alone of the senior citizens and their apparent influences on their families are reasons enough for politicians to salivate. However, whether the timing is pure coincidence or ill-motivated, the fact is, senior citizens will benefit from the law.

Among others, the new Act’s benefits and privileges include the grant of 20% discount and exemption from the value added tax (VAT) on the purchase of goods and services. Another benefit is the five (5%) percent discount on electric and water consumption provided that the individual meters for the utilities are registered in the name of the senior citizen and that monthly consumption should not exceed 100 kilowatt hours of electricity and 30 cubic meters of water.   The poor senior citizens will also enjoy free vaccination against the influenza virus and pneumococcal disease. Indigent senior citizens shall also be entitled to P2,000 death benefit assistance and monthly social pension of P500.

This and the two previous Acts’ intentions are unquestioned and will remain unquestionable. The fact is, the baby boomers are now headed to the twilight of their lives or careers and are supposed to reap the benefits of their long and arduous journey from the ravages of war to the pinnacle of success and fruition. Unfortunately, however, only very few are so blessed to have the kind of lives that they dreamed of. The rest are either left in the homes for the aged or are trying to stretch their patience while staying with their children and in dealing with their unavoidable in-laws. Others who have the misfortune of not having anyone to lean on have continued their wars on the streets begging for crumbs to move on day-by-day with stomachs half-empty. 

However, just like any laws passed in this country, questions were raised and ambiguities surmounted in the two previous Acts. Feeling oppressed, the merchants’ cooperation was the major stumbling block in its implementation. They argued that this Act is indicative of the failure of government in fulfilling its mandate in providing support to its elderly citizens. Simply put, this is a primary obligation of the government to the elderly that is passed on to an already heavily taxed business sector. 

Despite these arguments, merchants were bound to abide, albeit, forcibly. As expected, complaints from both the senior citizens and merchants have mounted. Heaps of grievances and criticisms have piled up day-by-day. 

Reportedly, while tax benefits are enjoyed, discount privileges, especially on drugs, are denied. Then, reasons vary, but the core of it was the treatment of the discount and the issue of dishonesty. On the discount, whether it should be treated as a tax deduction or a tax credit. On dishonesty, whether the drugs purchased, where discounts are asked, are for the exclusive use of the senior citizen as provided for by law.

As far as the discount is concerned, the Bureau of Internal Revenue (BIR) insisted that it should be a tax deduction or just a deduction from gross income. Drugstores insist it is a tax credit or a deduction from tax liability. Without a choice, drugstores complied with the law albeit sparingly to minimize losses. These are losses suffered out of giving 20% discount on items marked up at 19% or less. The truth is, while senior citizens were crying for discounts, smaller drugstores were fighting for their livelihood.  

This has changed, however, when the Supreme Court ruled on June, 2006 (GR No. 142299, Bicolandia Drug Corporation v. CIR, June 22, 2006; GR No. 148512, CIR v. Central Luzon Drug Corporation, June 26, 2006) that senior citizen’s discount is a tax credit, not a tax deduction. The Supreme Court took away the ambiguity of the law and hopefully, gave drugstores and senior citizens no reasons to argue.

However, with the new Expanded Senior Citizen’s Act of 2010, the tax angle will be up again for debate. Pending release of the revenue regulations from the Bureau of Internal Revenue (BIR), we can only speculate on whether or not the sale to senior citizens is really VAT exempt, not zero-rated. If these are really VAT exempt, expect businesses to raise a howl on the treatment. Their main argument will certainly focus on added cost because input taxes (the taxes they paid upon purchase from manufacturers/suppliers) can’t be claimed as tax (VAT) credits. Therefore, such paid VAT will form part of the purchase cost. Should these sales be zero-rated (subject to 0% VAT), then arguments may not surface at all. The input taxes they paid upon purchase are allowable tax (VAT) credits. 

However, whether or not these ticklish issues will be resolved, still, expect senior citizens not to feel comfortable in the way drugstores or merchants will be treating them. They will certainly take offense on their NBI-like questioning. Unknown to them, drugstores or merchants are just too careful in documenting these transactions. The fact is, BIR examines every tax credit drugstores or merchants claim with utmost scrutiny. The BIR requires that in giving discounts to qualified senior citizens, drugstores are required to keep separate and accurate record of sales, which shall include the name of the senior citizen, OSCA-ID, gross sales/receipts, sales discount granted, dates of transactions, and invoice number for every sale transaction to a senior citizen. Not complied, the BIR will deny drugstores’ or merchants’ tax credits. 

On the other hand, either based on facts or out of sheer perception, drugstores or merchants felt sometimes that drugs or items purchased by a senior citizen are not just for his exclusive use. Therefore, it shouldn’t be surprising if drugstores (especially on milk) will demand, to the senior citizens’ inconvenience, for doctor’s prescription before giving the discount to make sure this is complied.

If these quarrels still persist, these stem from pure misunderstanding. To avoid, senior citizens should always make available all routinely asked requirements upon purchase. Having in mind that this discount is imposed upon them, don’t let them feel harassed. It will never work that way. Drugstores or merchants, on the other hand, should understand their sensitivities. In dealing with them, they should have the tact of a diplomat, not the scrutiny of an NBI agent. Assigning one approachable pharmacist or cashier in an exclusive queue for senior citizens will certainly appease them.   

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