DOF prefers expansion of senior citizens' discount over VAT exemption

MANILA, Philippines - The Department of Finance (DOF) prefers an expansion of the discount on senior citizens’ purchase of medicines over an expanded value-added tax (VAT) exemption.

Finance Assistant Secretary Teresa Habitan said this is the preferred route that the DOF wants to take to help senior citizens.

She said that an expanded VAT exemption would apply to most goods and services including hotel services which senior citizens do not usually avail of anymore.

As such, the DOF wants the VAT exemption on senior citizens recalled because of the huge revenue losses.

According to estimates made by the department, the Expanded Senior Citizens Act of 2010 would result in revenue losses of P1.68 billion a year and that it would complicate the administration of the VAT.

“This is not the only way to help senior citizens,” Habitan noted.

Under the measure, the VAT exemption applies to the medicines, accessories and equipment; fees of attending physicians; medical, dental fees and diagnostic and laboratory fees and fares for public transportation.

Furthermore, the discount also applies on admission fees in cinemas, leisure and culture, services in hotels, restaurants and similar establishments and to the funeral and burial services for the death of senior citizens.

The Finance department said in its position paper that during deliberations on the expanded VAT, what the senior citizens lobbied for are discounts on their purchases of medicines.

However, Habitan said that since the Expanded Senior Citizens Act of 2010 is already in effect, the government would have to push for amendments in the existing measure to recall the expanded VAT exemption.

The Finance department also said that it lieu of the proposed VAT exemption, it supports an increase in the senior citizen’s discount to 30 percent from the existing 20 percent.

The Aquino administration is stepping up efforts to plug revenue loopholes. It is staring at a widening budget gap that is projected to hit P325 billion this year or 3.9 percent of gross domestic product (GDP) from a previous estimate of P300 billion.

The government’s budget deficit stood at P269.8 billion as of end-November 2010.