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Philippines Says Senior's VAT Exemption Being Abused

by Mary Swire,, Hong Kong

14 October 2016

The Philippines Government has said that the World Bank has estimated that leakages from the value-added tax (VAT) exemptions for seniors could reach close to PHP10bn (USD206m) this year.

The Department of Finance (DOF) released the statistics to explain why it is proposing to remove these concessions and broaden the tax base. Instead, the revenues generated would be directly targeted into financial aid for elderly citizens, it said.

VAT exemptions would be retained for raw food and other essentials, such as education and health care.

"We are proposing to really target the benefits only to the poor and the vulnerable, so that we avoid the leakages which is very rampant in our estimate. The World Bank estimated [close to] PHP10bn in leakage in the senior citizen [VAT] discounts," said Chua during a recent technical working group meeting in the Senate on the DOF's proposed tax reform plan.

Earlier, DOF spokesperson Paola Alvarez stressed that the 20 percent discount enjoyed by all senior citizens would remain and that some of the VAT exemptions would be replaced instead by better alternatives to shield poor and low-income seniors from the impact of the tax reform plan. These better alternatives are in the form of social protection programs that include expanded pensions and conditional cash transfers (CCT), she said.

"A much better option that would effectively provide aid to our indigent seniors are targeted cash transfers, expanded pensions, free rice, and other subsidies...," Alvarez said.

She said the VAT exemptions that the DOF is planning to lift are those granted to seniors when dining in restaurants because such discounts are usually enjoyed by affluent senior citizens who can "well afford anyway to do away with this privilege."

TAGS: compliance | Finance | VAT rates | tax | pensions | value added tax (VAT) | Philippines | food | health care | education | tax reform | VAT compliance matters

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