DOF backs proposed 30% discount for senior citizens

MANILA, Philippines – The Department of Finance (DOF) expressed support to the proposal to raise the discount rate for senior citizens from the current 20 percent to 30 percent.

Finance Undersecretary Gil Beltran said the discount rate hike should apply only to goods and services subject to value-added tax (VAT) enumerated under the Senior Citizens Act or Republic Act 7432.

Under the law, senior citizens are entitled to 20-percent discount on the utilization of services in hotels and similar establishments, restaurants, purchase of medicines, funeral and burial services and admission fees charged by theaters, cinema houses and other similar place of culture and leisure.

A proposal at the Senate seeks to amend this by increasing the discount rate to 30 percent from 20 percent on goods and services subject to VAT and to grant a minimum 20-percent discount on goods and services not covered by VAT.

Furthermore, the proposal also seeks to exempt senior citizens from the payment of individual income taxes provided that their annual taxable income does not exceed the latest poverty threshold as determined by the National Statistical Coordination Board for that year.

The proposal also seeks to grant a monthly stipend to senior citizens amounting to P1,500 to be sourced from the proceeds of the 12-percent VAT.

In a position paper on the proposal, the Finance department said it supports the intentions of the measure but said that there should be some conditions on certain provisions.

The department said the proposed monthly allowance of P1,500 should be done through the regular budgetary processes and not through the earmarking of VAT collections.

“While we appreciate the noble intention of the substitute bill to provide additional assistance to the more vulnerable senior citizens, we regret that we cannot support the proposal to use and earmark VAT proceeds to fund the proposed monthly stipend of P1,500 of senior citizens,” Beltran said.

He said that earmarking VAT proceeds for senior citizens could mean a dent in revenues of roughly P4 billion a month or P53 billion a year.

“The most basic argument against earmarking of revenues is that it limits the flexibility of government in budgeting its scarce revenues that misallocation of resources is not a remote possibility to take place,” Beltran also said.

On the issue of income tax exemption, the Finance department said this should be consistent with incentives under Republic Act 9504 or the Minimum Wage Law that exempts minimum wage earners from the payment of income taxes on their taxable income and increases their personal exemption level.

Under the law, implemented last year, senior citizens who are minimum wage earners automatically enjoy the income tax exemption.

Senior citizens who are not minimum wage earners benefit from the higher personal exemption of P50,000 per individual income taxpayer. –Iris Gonzales, Philippine Star