DOF nixes PWD VAT exemptions

MANILA, Philippines - The Department of Finance (DOF) reiterated yesterday its opposition  to a  proposed measure that seeks to exempt persons with disabilities (PWDs) from paying value-added tax on certain goods and services, saying such a plan is susceptible to abuse and will result in P1.12 billion in foregone revenues for the government.

The House of Representatives has approved on third and final reading House Bill 1039 which aims to give tax relief to members of society that are unemployed because of disabilities.

PWDs currently account for 1.5 percent of the total population.

The bill, which seeks to amend the Magna Carta for Persons with Disabilities, aims to exempt PWDs from VAT in addition to the discount they are already enjoying for medical, transportation and recreational services.

The proposed VAT exemption shall apply on their medical and dental services; purchase of medicines in all drugstores; public railways, skyways and bus fare; admission fees charged by theaters, cinema houses, concert halls, circuses, carnivals and other places of culture, leisure and amusement; and all services in hotels and similar lodging establishments, restaurants and recreation centers.

DOF Undersecretary Jeremias N. Paul Jr. said while the government remains committed to helping the PWD sector, it believes the measure is not the best way to serve PWDs.

“The measure will expose government revenues to massive risks due to abuses and leakages. The long-standing international argument against VAT exemption is clear: proposals like this will result in tax administration problems and even compliance issues for the business sector,” Paul said.

“For the tax administrators, clarifying and ensuring only PWDs avail of the exemption, and not unscrupulous individuals seeking to abuse the system, will be highly difficult,” he said.

Paul said the proposal would also result in additional tax compliance burden for businesses as it would require  separate accounting records for the purchases of goods and services by PWDs, in addition to that of senior citizens.

Instead, Paul said subsidies should be given through the expenditure approach as this is more transparent, efficient, and effective in empowering PWDs.

“We re-affirm our commitment to PWDs by advising against a VAT exemption measure that would be hard to implement and prone to abuse. We will work with Congress to pass sensible and balanced proposals that better serve PWD interests,” Paul said.

Paul said the government is working to further shore up revenues to increase funding for programs that will benefit PWDs.

“As the Philippines is the second least efficient in terms of VAT efficiency among the ASEAN 5, the country can ill afford to pass a VAT exemption measure that cannot be guaranteed to be availed solely by PWD citizens,” Paul said.

“The DOF firmly believes that fiscal responsibility goes hand in hand with social responsibility. As we work to maintain the firm fiscal footing we have worked so hard to achieve, we must also take care to serve interests of citizens in the PWD sector by providing them effective, efficient and transparent relief through targeted subsidies,” he also said.