Senior citizens get full 20% discount

The government is expected to approve tomorrow the Implementing Rules and Regulations (IRR) of the Expanded Senior Citizens Act of 2010 that would allow the country’s senior citizens to enjoy starting July the full 20-percent discount tax-free on goods and services that they would like to avail for themselves, including medicines.

Finance Undersecretary Gil Beltran on Wednesday said that the IRR, which would effectively implement Republic Act 9994, would be signed on June 18 at the office of the Department of Social Welfare and Development.

Implementation of the rules and regulations, according to Beltran, would cost the government billions in revenues.

“The IRR would already be signed and the implementation of this tax-eroding measure would impact negatively on our revenues by about P1.7 billion a year,” he said.

If there would be no “effectivity” clause in the IRR, Republic Act 9994 would inevitably take effect 15 days following its publication in at least two newspapers of general circulation.

The IRR was drafted by the Department of Health, Department of Social Welfare and Development (DSWD) and the Bureau of Internal Revenue (BIR) in consultation with the private sector, particularly businesses that would absorb the 20-percent discount.

Under the old law, Republic Act 7432, senior citizens can only avail of 8 percent of the original 20-percent discount as they are also required by law to pay the 12-percent value-added tax (VAT) on their purchases.

With the amended RA 9994, senior citizens are exempt from paying the VAT, thus restoring to a full 20 percent the discount that was earlier provided for senior citizens by RA 9257 covering purchases of medicines, food items and certain services.

The grant of 20-percent full discount on purchases of medicines, which account for the bulk of purchases of senior citizens, was a source of concern for drugstores and pharmacies, particularly the small ones.
The Social Welfare department has said that manufacturers and distributors might have to shoulder 70 percent, or effectively 14 percent of the 20-percent discount, to ensure that small drugstores and pharmacies need not shoulder the burden of the entire discount.

Drugstores and pharmacies have been urging the government to have the 20-percent discount zero-rated.

But the BIR said that the 20-percent VAT-free discount would not be zero-rated.

Thus, discounts cannot be deducted from the amount of taxes paid or tax-exempted, and that the drugstores would have to shoulder the 12-percent tax. –Katrina Mennen A. Valdez Reporter, Manila Times