BIR cancels elderly’s VAT-free utility bills

The government has started penalizing senior citizens for its inability to raise revenues.

A few days after Malacañang said it would not give priority to a proposal to remove the 12 percent value added tax (VAT) exemption enjoyed by the elderly, the Bureau of Internal Revenue (BIR) had stricken off such privilege on water and electricity bills.

The BIR had issued Revenue Regulation (RR) 8-2010 canceling the VAT exemption privilege on utility bills for senior citizens provided under RR 7-2010.

Internal Revenue Commissioner Kim Jacinto-Henares said the privilege was withdrawn to reduce government tax losses as a result of the implementation of the Expanded Senior Citizens Act of 2010.

Under the law, the elderly are not only granted 20 percent discount on purchases of wide range of goods and services, but are also exempted from paying the 12 percent VAT, thus bringing total discounts to 32 percent, according to Henares.

Under Section 5 of the Senior Citizens Law, the elderly are granted special five percent discounts in their electric and water bills provided consumptions do not exceed 100 kilowatthours (kwh) for electricity and 30 cubic meters of water per month.

The privilege is granted per household regardless of the number of senior citizens residing in the place.

As a result, senior citizens got a total discount of 17 percent on their electric and water bills.

But with the withdrawal of the 12 percent VAT exemptions the elderly will now be getting only a five percent discount on their electric and water bills.

The new BIR ruling was signed by Finance Secretary Cesar Purisima and recommended by Henares.

The BIR explained that except for electric and water bills, senior citizens will still enjoy the privileges of not paying VAT on their purchases.

Malacañang earlier had indicated that it was studying proposals to remove the value added tax (VAT) exemption on the elderly through the enactment of the Expanded Senior Citizens Act (ESCA) but said that it was not a priority.

Presidential spokesman Edwin Lacierda said the Aquino administration has not taken any position on the matter because the proposal is still at the level of Finance Secretary Cesar Purisima.

Lacierda said the measure was communicated to them by Sen. Sergio Osmeña III during a recent budget hearing but he indicated that this particular idea has not yet been seriously discussed by the government.

“It was Senator (Serge) Osmeña who suggested removing the VAT exemption and instead increasing the discounts for the senior citizens. Secretary Purisima answered that we will study the matter but we have no position on that yet,” Lacierda had said.

Asked is his statement meant declaring the administration’s openness to the idea despite the fact that it might affect the welfare of the elderly once implemented, Lacierda said not necessarily.

“We haven’t gone to that conclusion yet. What we mean is that, based on the question raised by Senator Osmeña and the answer given by Secretary Purisima, we will see — let’s wait for the study if it comes out,” Lacierda explained.

Lacierda also went silent when pressed by reporters on whether the Aquino administration is willing to sacrifice its overwhelming popularity in exchange of implementing revenue generation measures.

He just said the suggestion forwarded by Osmeña is not a priority for the President at this point.

Osmeña, chairman of the Senate committee on banks and financial institutions, proposed the removal of the VAT exemption on senior citizens which he said cost the government P100 billion in foregone revenues.

Sen. Pia Cayetano, the principal author of the Expanded Senior Citizens Act, however, disagreed with Osmeña saying his statement was “sweeping and unfair.”

She added that Osmeña should not “train his eyes solely on lost revenue due to the exemptions enjoyed by the senior citizens.” –Daily Tribune