President asked to veto bill exempting the elderly from VAT

The Department of Finance (DOF) wants President Gloria Macapagal-Arroyo to veto a proposed law expanding the tax incentives given to senior citizens. Finance Undersecretary Gil Beltran said on Thursday the measure would lead to P1.68 billion in foregone revenues, adding and that it would only complicate value-added tax (VAT) administration. Congress has ratified the bill exempting senior citizens from paying the 12-percent VAT, and it is only awaiting the President's signature. Under the proposed Expanded Senior Citizens Act of 2010, the VAT exemption will apply to medicines; accessories and equipment; doctors' fees; medical, dental, diagnostic and laboratory fees; and fares. Discounts will also cover expenses for movie tickets, leisure and culture, hotel services and restaurants, as well as funeral and burial services for the senior citizen. "The BIR would be faced with an extremely difficult task of ensuring that the VAT exemption is applied only to senior citizens and that the VAT on other sales is imposed and collected," the Finance department said in a position paper. This would likely be a source of leakage in the VAT system, particularly for services such as MRT fares, it added. The exemption would also mean added costs to businesses since these would have to set up a different invoice system for purchases of the elderly, the DOF said. It said that in lieu of the VAT exemption, the government could instead increase senior citizens' discount to 30 percent from 20 percent. Lawmakers earlier rejected this proposal. Also under the bill, indigent senior citizens will be given a monthly stipend of P500 subject to regular review by Congress. Senior citizens also get a 5-percent discount on water and electricity bills. — NPA, GMANews.TV