PWDs, indigent seniors favor direct transfer program over VAT exemptions

Indigent elderly citizens and persons with disabilities (PWDs) prefer to get direct transfer in the form of social pensions or a health package rather than being exempted from paying the value added tax (VAT), which is a tax privilege that they said only affluent seniors with more money to spend get to enjoy under the current system. They, however, told senators that the VAT exemptions on essential items like medicines should stay as these are the only benefits they get from the current VAT law. The Department of Finance (DOF) is proposing to plug massive leakages under the VAT system by expanding its tax base through the removal of certain exemptions. This proposal is among the measures that the DOF needs to put in place to offset the revenue erosion arising from the key element of the first package of its comprehensive tax reform program, which is the lowering of personal income taxes. VAT exemptions for raw food, education and health care, including medicines, would be retained under the DOF proposal. The additional revenues collected from the lifting of the VAT exemptions for other goods and services would be used to expand targeted transfer and other social protection programs for the country's vulnerable sectors, such as poor seniors and PWDs, the DOF said. In a recent hearing by the Senate Ways and Means Committee, representatives of PWDs and seniors' organizations agreed that the removal of the VAT exemptions, except for medicines and other basic items, would not be detrimental to their welfare as long as the government puts in place social protection programs that would directly benefit them. "I would say that since the trend would also be to reduce the personal income taxes, I do not think the abolition of VAT exemptions would be detrimental to the PWDs, since there will also be an equivalent lowering of income taxes and the promise of direct services that will be implemented," said Jose Go Ranola of the Philippine Blind Union Inc. Ranola also told senators: "So it is my personal opinion, I am supporting this move to remove the VAT exemption." Cris Migrino of the civil society group Coalition of Services of the Elderly (COSE) Inc. said that 70 percent of its members nationwide belong to the poorest of the poor, while only 30 percent can afford to spend for leisure goods, which is why the removal of VAT exemptions for seniors have "no meaningful impact" for the organization's members. COSE is the umbrella organization of 135 associations representing the interests of elderly citizens nationwide. "Noong nalaman namin na yung VAT exemption ay na-retain doon sa medicine, natuwa kami roon dahil doon lang nakikinabang ang aming sector dahil mostly doon sa aming samahan ay 30 percent lang ang may kayang bumili, at 70 percent ay poorest of the poor. (When we learned that the VAT exemption will be retained for medicines, we were pleased because this is the only area where our sector benefits from the exemption, because in our organization,, only 30 percent can buy things, and 70 percent are from the poorest of the poor)," Migrino said. "There is no meaningful impact tungkol doon sa pag-alis ng VAT [exemptions] sa amingsector (in removing the VAT [exemptions] from our sector)," Migrino told senators led by Sen. Juan Edgardo Angara, who chairs the ways and means committee. Migrino said that if the government would remove certain VAT exemptions, then it should channel the additional revenues collected from this to expand social pension benefits to seniors not yet covered by the program. COSE Executive Director Emily Beridico also said that tax exemptions benefit only seniors who are "better off" in life. She cited a UP Population Institute study showing that the implementation of the 20 percent discount for seniors in the purchase of medicines also benefit indigent seniors as much as elderly citizens belonging to the middle and upper income class. "Sumasangayon kami na kung tatanggalin yung VAT exemption sa senior citizens, kapalitin exchange po na magkaroon ng comprehensive na magandang programa para sasector ng nakatatanda, katulad po ng universal social pension (We agree that if you remove the VAT exemptions for senior citizens, the trade off should be a comprehensive program for the elderly sector such as the universal social pension)," Beridico said. Migrino said expanding the social pension program for seniors would also make the country's elderly feel a "sense of belonging" in society. Finance Undersecretary Karl Kendrick Chua said changing the form of benefits provided for the country's vulnerable sectors from outright exemptions, which favors more the rich than the poor, to highly targeted social protection measures would help plug the massive leakages in the VAT system. "We care for the poor and would like to help the poor and vulnerable people who would be affected, but we think that a better system to do it is through the expenditures side, not the tax side," Chua, the DOF's chief economist, said. "This is so that we can avoid the leakages and in fact transfer the leakages that we [plug] to provide better services," he added. "To use the tax system to protect the poor and low-income earners risks massive leakages as is currently happening." Chua said indigent senior citizens will be protected by providing them with higher social pensions, while PWDs will get expanded health insurance coverage and other benefits under the social protection package of the DOF-proposed tax plan. "We propose to do a highly-targeted transfer reform program wherein the poorest 50 percent of households will be fully protected through a highly-targeted unconditional cash transfer in the initial year, and that means around P200 to P500 per month or up to P6,000 over a year per household, and this is calibrated based on the possible increase in inflation and the impact of the higher oil (tax increase) on their lives," said Chua at a recent tax reform forum. Chua said the poorest 50 percent of households earning P5,000 or less a month apiece will each get unconditional cash transfers of up to P6,000 over a year in the initial phase of the DOF's tax reform program. Under the proposed P3.35 trillion national budget for 2017, the number of seniors getting social pensions of P500 each per month would double from the current 1.4 million to 2.8 million because the program would cover seniors 60 years old and above. In the previous budgets, only seniors 77 years old and above are covered by the social pension program. Thus, the allocation for indigent senior citizens would also double from P8.71 billion this year to P17.94 billion under the proposed 2017 national budget.

Source: Philippine Information Agency