Aug 172016

Persons with disabilities and senior citizens may lose VAT exemptions to make up for revenue losses that will result from the lowering of corporate and individual income tax rates. MICHAEL VARCAS, File

MANILA, Philippines — There is nothing final yet regarding proposals to remove value added tax (VAT) exemptions of persons with disabilities (PWDs) and senior citizens, Malacañang clarified Wednesday.

The Finance department wants to lift certain VAT exemptions to make up for revenue losses that would result from the lowering of corporate and individual income tax rates. Some lawmakers are against the proposal, which they described as difficult and “too ambitious.”

Presidential spokesman Ernesto Abella said the proposal to take away VAT exemptions would still be subject to further discussions.

“There were talks about it but nothing is final yet. There (is a need to hold) discussions and to work out the details discussed,” he said.

According to Abella, the proposed removal of some VAT exemptions is “a question of household accounting” as he cited the need to cover for the revenues to be taken away by lower income tax rates.

In his budget message, President Rodrigo Duterte said the executive would propose a package of reform measures to generate additional revenues without burdening the poor.

The tax measures to be proposed include the lowering of income tax rates for individuals and corporations from 32 percent and 30 percent, respectively, to 25 percent, indexing oil excise taxes to inflation, rationalizing of fiscal incentives and expanding the VAT base.

The tax reform package was discussed during Duterte’s meeting with senators at the Palace last Monday.

Senate Minority Leader Ralph Recto, one of the senators present during the meeting, said the government may lose P75 billion in tax revenues once individual and corporate income tax rates are lowered.

According to Recto, the lifting of some VAT exemptions would generate around P600 billion, an amount that he described as “too high.”

Senate Ways and Means Committee Vice Chairman Sen. Joel Villanueva is also against the removal of VAT exemptions of PWDs and senior citizens and is instead pushing for a tax on sugary beverages and better tax administration.

The Duterte administration is also eyeing the removal of VAT exemptions on agricultural products in its original state, livestock and export. 

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