Seniors’ VAT perk ’idiotic’

Senator cites loss of P100B in last 2 years

The exemption of senior citizens from the 12-percent value-added tax (VAT) was “idiotic,” Sen. Sergio Osmeña 3rd said on Thursday. According to Osmeña, the government lost about P100 billion in the last two years “from all those idiotic tax exemptions that Congress has passed.”

When asked if the exemption of senior citizens from VAT was one of those “idiotic tax exemptions,” he said it was.

“VAT is VAT. Being senior citizens should not exempt them from VAT,” Osmeña added.

The law exempts senior citizens (60 years old and above) from paying VAT for their purchases to restore their original 20-percent discount.

The 12-percent VAT had reduced their discount for medicine and other essentials to only 8 percent.

The Bureau of Internal Revenue had proposed that the discount of senior citizens be raised to 32 percent but still subject them to VAT.

Congress, however, rejected this proposal and opted for the outright exemption of senior citizens from VAT.

Osmeña said that he could not care less if some people got angry by his calling the VAT exemption of senior citizens “idiotic.”

“From the macro-economic point of view, if we give tax exemptions to everybody who feels they deserve a tax exemption, we will end up eroding the revenue base of government,” he added.

Tax base erosion

Osmeña said that erosion of this tax base would prevent the government from educating children, from giving enough pay for teachers and doctors.

He added that any tax exemption should be well thought out or it would make the system inefficient.

Besides the exemption of senior citizens from VAT, Congress also passed laws exempting minimum wage earners from income tax and raising the personal exemptions of income-tax filers.

Osmeña said that besides the P100 billion lost in “idiotic” tax exemptions, the government also lost an estimated P150 billion from smuggling.

“Unfortunately, we have a P350-million budget deficit so even if we plug that particular loophole, it is not going to be enough,” he added.

The Aquino administration had eliminated new taxes as source of revenues to bridge the budget deficit. Osmeña said that the government could survive without raising taxes but it cannot survive without borrowing.

He added that the government could also reduce the P350-billion deficit by selling assets.

“We don’t have enough assets to sell, therefore, borrow,” the senator said.

He added that if the government could get enough funds to cover even P200 billion of the P350-billion budget deficit, the funds should be used for infrastructure projects.

“We have to build better roads, better ports, better Pagasas [Philippine Atmospheric, Geophysical and Astronomical Services Administration], better schools, better hospitals. As you spend, more jobs are created, businesses are formed. That is how an economy keeps growing,” Osmeña said. –Efren L. Danao Senior Reporter, Manila Times