DOF wants senior citizens’ exemption from VAT recalled

Published by rudy Date posted on September 13, 2010

MANILA, Philippines — The Department of Finance is pushing the recall of the value-added tax exemption for senior citizens and suggesting that this be replaced by an increase in their discount on purchases to 30 percent from 20 percent.

According to a finance official, this is one of the proposals that the DOF has been preparing related to the possible amendment of revenue-eroding laws that were bleeding the government by as much as P86 billion in foregone revenues annually.

During recent hearings conducted by the Senate committee on finance, finance officials reiterated the need to address the effects of at least 14 laws given the government’s continually high deficit-spending.

The government expects to spend P325 billion over the national budget this year, which it is financing through more borrowings from local and foreign lenders.

Finance Assistant Secretary Lourdes B. Recente said in an interview that the DOF might submit to the Senate within the month proposals on how to change the laws.

Finance Secretary Cesar V. Purisima told senators earlier that Congress should amend the Expanded Senior Citizens Act—signed into law last February—that exempted the elderly from paying the value-added tax on certain goods and services.

The DOF had opposed VAT exemption for the elderly while these were still pending in Congress, preferring instead that the 20-percent discount for senior citizens’ purchases be raised to 30 percent.

Finance officials had said that such an exemption would present a logistical nightmare for the Bureau of Internal Revenue, which has been short of resources to implement existing tax measures.

DOF documents showed that the Treasury could lose P1.68 billion in tax collections yearly due to the new law.

Other laws that the DOF wanted changed are the corporate income tax reduction law (costing the government P15 billion to P20 billion a year); individual income tax relief law (P26 billion); personal equity and retirement account law (P12 billion); the law that imposed a franchise tax on power transmission instead of all other taxes (P9 billion), and the tourism incentives law (P6 billion).

There are also the law that abolished the documentary stamp tax (DST) on secondary trading of stocks (P1.4 billion); law on incentives under the Pag-IBIG Fund charter (P1 billion); law creating the Bataan freeport zone (P3 billion), and law on incentives for real estate investment trusts (P2.7 billion).

Further, the DOF is also pushing changes in the law that make free legal services rendered by lawyers tax deductible (P100 million); law that reduced the tax on life insurance premiums and restructured the DST on life insurance policies (a total of P2 billion); law that removed the DST on remittances from overseas Filipinos (P1 billion), and the law that exempted local water utilities from income tax and condoned their unpaid taxes (P800 million). –Ronnel Domingo
Philippine Daily Inquirer

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