Duterte admin keeping seniors' 20% discount, most VAT exemptions

MANILA, Philippines – The administration of President Rodrigo Duterte will not remove senior citizens' 20% discount on purchases as well as exemptions from the value-added tax (VAT) on food in raw form and medicines for its proposed tax reform program, said Department of Finance (DOF) Spokesperson Paola Alvarez.

But while the 20% discount on purchases and most VAT exemptions would "remain intact," the VAT exemption granted to senior citizens when they dine in restaurants "would have to be lifted."

"[S]uch discounts are usually availed of by affluent senior citizens who can well afford anyway to do away with this privilege," Alvarez explained in a statement on Wednesday, August 31.

The DOF spokesperson also said the proposed tax reform program presented by Malacañang's economic team to Congress last week plans to raise enough revenues to fund targeted subsidies for the poorest of the poor.

Alvarez said that in lieu of the VAT exemptions to be taken out from other sectors, the government is putting in place direct subsidy programs for the benefit of the needy and other vulnerable sectors to be affected by the proposed VAT exemptions. (READ: Balanced budget 'impractical' for the PH until 2022 – Diokno)

"In order to better utilize VAT collections, the amount that the government collects from lifting of VAT exemptions on restaurant dining enjoyed by seniors would be allocated for a fund that would be used to provide targeted subsidies to the poor, including indigent senior citizens," Alvarez said.

"To illustrate, a senior citizen who can afford to eat at a fancy restaurant  that  charges him with a bill of P1,000, the exemption from VAT he will get is P120," she said. "Now, this amount of P120 is something he doesn't really need  because  he can afford to spend P1,000 for a meal. "

"Now if we compare this to a senior citizen who has to make ends meet for him to be able to afford his maintenance medicine, the P120 saved for VAT would go a long way. This is how we want to distribute a little wealth through taxation," she stressed.

The DOF spokesperson reiterated that the 20% discount enjoyed by all senior citizens would remain as well ​as the VAT exemptions they enjoy for their purchases of medicines and food in its raw form.

"To clarify our proposal, only the VAT exemptions in restaurants would be removed. The money the government collects from the lifting of the VAT exemptions for senior citizens in restaurants will be used instead to help other senior citizens who badly need the subsidy," she said.

Alvarez said Finance Secretary Carlos Dominguez III had made it clear that VAT exemptions on food in its raw form, medicine, and education would not be removed because these 3 essentials are what the poor need the most. 

"The Duterte administration's tax reform plan does not end with personal and corporate income tax cuts. It also includes revenue-generating measures not only to offset the collections lost from the tax reductions, but also to raise funds for higher spending on infrastructure, human capital, and social protection initiatives," Alvarez said.

She said the additional revenues would help bridge the chronic income gap between Metro Manila and other regions, which is one way to cut the poverty rate to 17% from the current 26% by the time Duterte's term ends in 2022.

The tax reform package that the Duterte administration is preparing will forego almost P200 billion in revenue.

But Dominguez had said his department plans to recoup it through a package of new taxes and incentive cuts.

The DOF plans to impose additional excise taxes which would encourage healthy lifestyles such a "sweet tax" on sugary drinks and fatty food. – Rappler.com

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