Finance Department Spokesperson Paola Alvarez said the proposed tax reform program presented by Malacanang’s economic team to Congress last week aims to raise enough revenues to fund targeted subsidies for the poorest of the poor even as she stressed that the 20% discount on purchases or transactions along with exemptions from the value added tax (VAT) on food and medicines now enjoyed by seniors would remain intact.
Alvarez further said that in lieu of the VAT exemptions to be taken out from other sectors as part of the proposed comprehensive tax reform program, the government is putting in place direct subsidy programs for the benefit of the needy and other vulnerable sectors to be affected by the would-be VAT exemptions.
“But the VAT exemption granted to seniors when dining in restaurants, would have to be lifted,” Alvarez said, “because such discounts are usually availed of by affluent senior citizens who can well afford anyway to do away with this privilege.”
“In order to better utilize VAT collections, the amount that the government collects from lifting of VAT exemptions on restaurant dining enjoyed by seniors would be allocated for a fund that would be used to provide targeted subsidies to the poor, including indigent senior citizens,” Alvarez said.
“To illustrate, a senior citizen who can afford to eat at a fancy restaurant that charges him with a bill of 1,000 pesos, the exemption from VAT he will get is 120 pesos,” she said. “Now, this amount of 120 pesos is something he doesn’t really need because he can afford to spend 1000 pesos for a meal.”
“Now if we compare this to a senior citizen who has to make ends meet for him to be able to afford his maintenance medicine, the 120 pesos saved for VAT would go a long way. This is how we want to distribute a little wealth through taxation,” she stressed.
Alvarez pointed out that “the 20 percent discount enjoyed by all senior citizens would remain as well as the VAT exemptions they enjoy for their purchases of medicines and food in its raw form.”
“To clarify our proposal, only the VAT exemptions in restaurants would be removed. The money the government collects from the lifting of the VAT exemptions for senior citizens in restaurants will be used instead to help other senior citizens who badly need the subsidy” she said.
Alvarez said Finance Secretary Carlos Dominguez III had made it clear that VAT exemptions on food in its raw form, medicine and education would not be removed because these three essentials are what the poor need the most.
“The Duterte administration’s tax reform plan does not end with personal and corporate income tax cuts. It also includes revenue-generating measures not only to offset the collections lost from the tax reductions, but also to raise funds for higher spending on infrastructure, human capital and social protection initiatives,” Alvarez said.
She said the additional revenues would help bridge the chronic income gap between Metro Manila and the other regions, which is one way to cut the poverty rate from the current 26 percent to only 17 percent by the time President Duterte steps aside in 2022.
“As represented by the DBCC (Development Budget Coordinating Council) to the House of Representatives, the comprehensive tax reform program of the Duterte Administration would allow us to generate funds that we can use to invest in areas where the per-capita income is lowest in the country,” Alvarez said.
Alvarez compared, for instance, the per-capita Gross Regional Domestic Product (GRDP) for 2015 between that of the National Capital Region (NCR), which is the highest at P398,985, and the Autonomous Region in Muslim Mindanao (ARMM), which is the lowest (and 15 times smaller) at P26,757 in current prices.
The per-capita GDRP for ARMM is a mere 7 percent of that of NCR, which is nearly three times the national average of P131,026 and 9 percent higher than in 2014 based on current prices.
Compared to Calabarzon (Cavite, Laguna, Batangas, Rizal and Quezon region), which has a per-capita GRDP of P145,859 and the Cordillera Administrative Region (CAR) with P131,110, ARMM remains at the losing end, she said.
Alvarez said that under the proposed P3.35-trillion “Budget for Real Change” of the Duterte administration, under spending which has hampered the implementation of social protection programs for the poor, would be a “thing of the past.”
Earlier, Domiguez had informed lawmakers that to help fund the massive infrastructure buildup and investments in human capital and social protection under the Duterte presidency, the government would raise the budget deficit to 3 percent of the GDP under the 2017 proposed budget, which will “substantially be offset by lower debt service.”