Press Release
October 26, 2016

'PWD VAT exemption law not even implemented yet'

Senator Sonny Angara has urged the government to hold back from its proposal to lift the value-added tax (VAT) exemption enjoyed by senior citizens and persons with disabilities (PWDs) which he said is a "very emotional" issue.

Finance Undersecretary Karl Chua on Tuesday justified before the Senate committee on ways and means the government's plan to remove VAT exemption for the elderly and PWDs, saying that higher socialized pension and targeted cash transfers are a better option to avoid leakages in the VAT system wherein even non-seniors benefit from the exemption.

Chua said their proposal is anchored on the "principle of equity and targeted subsidy" to which Angara replied, "But there's also the principle of compassion. Ayaw naman natin na ang ating mga senior at PWD pa ang inunang tanggalan ng benepisyo."

The lawmaker also called on the government to issue the "overdue" implementing rules and regulations (IRR) of the law exempting PWDs from VAT or Republic Act 10754, which Angara authored and sponsored, and was signed into law in March of this year.

"I would like to see the law implemented first before we even consider its removal. Hindi pa nga nila natitikman yung benepisyo ng batas tapos binabawi na," he said.

According to the Department of Social Welfare and Development, the IRR of RA 10754 is now pending "legal clearance" from the finance and health departments, and that they are targeting to hold a ceremonial signing of the IRR during a PWD summit in November.

The DOF estimated to save P6 billion from the removal of VAT exemption of seniors and P1 billion from PWDs.

At present, there are approximately 7.5 million senior citizens and 1.4 million PWDs.

During the hearing, while senior citizens groups welcomed the plan of the DOF to retain the VAT exemption on medicines only, they sought for a wider coverage of the existing pension program of the government.

The broadening of the VAT base is part of the DOF's first of six packages that seeks to increase excise taxes on petroleum products and automobiles to compensate for the P180-billion revenue loss from the lowering of personal income tax rates.

The Senate ways and means committee chairperson said he is anticipating longer debates and will conduct more public hearings on such proposal, while the DOF assured that they will further refine their tax reform package.

"This is the just the first hearing on the DOF's proposal. For now, we are not convinced and the argument still needs to be strengthened. We will not support or make a recommendation yet on the tax reform proposal until we have heard all the affected sectors," Angara said.

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