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Senior Citizen's Act of 2010: Old & new disagreements

Generally, the baby boomers are now headed to the twilight of their lives or careers and are supposed to reap the benefits of their long and arduous journey from the ravages of war to the pinnacle of success and fruition. Unfortunately, however, only very few are so blessed to have the kind of lives that they dreamed of. The rest are either left in the homes for the aged or are trying to stretch their patience while staying with their children and in dealing with their unavoidable in-laws. Others who have the misfortune of not having anyone to lean on have continued their wars on the streets begging for crumbs to move on day-by-day with stomachs half-empty. 

Recognizing these sad tales and grievous difficulties unduly suffered by most of these senior citizens, congress passed Republic Act 7432 in 1992. It came in the form of tax benefits and discount privileges among others. However, just like any laws passed in this country, questions were raised and ambiguities surmounted. Feeling oppressed, the merchants’ cooperation was the major stumbling block in its implementation.

Consequently, just like the other laws of the land, before its implementation can be fully felt, another one came along. So that, in 2003, Republic Act No. 9257, otherwise known as the “Expanded Senior Citizen’s Act of 2003” was passed. It aimed to grant additional benefits and privileges to senior citizens. In this act’s implementing rules and regulation (IRR), it emphasized that senior citizens are entitled to 5% discount on selected basic necessities and prime commodities. These products that may be subject to 5% include, among others, canned sardines, tuna, evaporated filled milk, condensed filled milk, and powdered milk, coffee, bread, white and brown sugar, cooking oil, instant noodles, luncheon meat, meat loaf, corned beef, ready-to-cook (processed) pork, beef, and chicken whether frozen/refrigerated/preserved as well as powdered, liquid, bar laundry, and detergent soap.

More importantly, milk products that are not listed above as basic necessities or prime commodities but with doctor’s prescription for therapeutic purposes will be considered as medicine. Hence, the senior citizen can avail of the 20% discount when these milk products are purchased with prescription from a drug store. However, if the senior citizen buys the said milk products from groceries or supermarkets, he/she could not avail of the discount.

To preclude abuses, the IRR specifically establish a cap on senior citizens a non-cumulative weekly purchase of P650.00. Therefore, any purchases that go beyond this limit in a week will no longer enjoy discounts.

With these additional benefits, it was hoped that the law could now be implemented without hitches. Despite these amendments, however, complaints from both the senior citizens and merchants are still mounting. Heaps of grievances and criticisms have piled up day-by-day. 

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Reportedly, while tax benefits are enjoyed, discount privileges, especially on drugs, are denied. Then, reasons vary, but the core of it was the treatment of the discount and the issue of dishonesty. On the discount, whether it should be treated as a tax deduction or a tax credit. On dishonesty, whether the drugs purchased, where discounts are asked, are for the exclusive use of the senior citizen as provided for by law.

As far as the discount is concerned, the Bureau of Internal Revenue (BIR) insisted that it should be a tax deduction or just a deduction from gross income. Drugstores insist it is a tax credit or a deduction from tax liability. Without a choice, drugstores complied with the law albeit sparingly to minimize losses. These are losses suffered out of giving 20% discount on items marked up at 19% or less. The truth is, while senior citizens were crying for discounts, smaller drugstores were fighting for their livelihood.  

This has changed, however, when the Supreme Court ruled on June, 2006 (GR No. 142299, Bicolandia Drug Corporation v. CIR, June 22, 2006; GR No. 148512, CIR v. Central Luzon Drug Corporation, June 26, 2006) that senior citizen’s discount is a tax credit, not a tax deduction. The Supreme Court took away the ambiguity of the law and hopefully, gave drugstores and senior citizens no reasons to argue.

However, with the new Senior Citizen’s Act of 2010, the tax angle will be up again for debate. Pending release of the IRR, we can only speculate on whether or not the sale to senior citizens is really VAT exempt, not zero-rated. If these are really VAT exempt, expect businesses to raise a howl on the treatment. Their main argument will certainly focus on added cost because input taxes (the taxes they paid upon purchase from manufacturers/suppliers) can’t be claimed as tax (VAT) credits. Therefore, such paid VAT will form part of the purchase cost. Should these sales be zero-rated (subject to 0% VAT), then arguments may not surface at all. The input taxes they paid upon purchase are allowable tax (VAT) credits. 

However, whether or not these ticklish issues will be resolved, still, expect senior citizens not to feel comfortable in the way drugstores or merchants will be treating them. They will certainly take offense on their NBI-like questioning. Unknown to them, drugstores or merchants are just too careful in documenting these transactions. The fact is, BIR examines every tax credit drugstores or merchants claim with utmost scrutiny. The BIR requires that in giving discounts to qualified senior citizens, drugstores are required to keep separate and accurate record of sales, which shall include the name of the senior citizen, OSCA-ID, gross sales/receipts, sales discount granted, dates of transactions, and invoice number for every sale transaction to a senior citizen. Not complied, the BIR will deny drugstores’ or merchants’ tax credits. 

On the other hand, either based on facts or out of sheer perception, drugstores or merchants felt sometimes that drugs or items purchased by a senior citizen are not just for his exclusive use. Therefore, it shouldn’t be surprising if drugstores (especially on milk) will demand, to the senior citizens’ inconvenience, for doctor’s prescription before giving the discount to make sure this is complied.

If these quarrels still persist, these stem from pure misunderstanding. To avoid, senior citizens should always make available all routinely asked requirements upon purchase. Having in mind that this discount is imposed upon them, don’t let them feel harassed. It will never work that way. Drugstores or merchants, on the other hand, should understand their sensitivities. In dealing with them, they should have the tact of a diplomat, not the scrutiny of an NBI agent. Assigning one approachable pharmacist or cashier in an exclusive queue for senior citizens will certainly appease them.   

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