Alvarez vows to block removal of VAT exemption on DOF tax package

House Speaker Pantaleon “Bebot” Alvarez. CDN PHOTO/JUNJIE MENDOZA

Speaker Pantaleon Alvarez on Thursday said he would block the proposal of the Department of Finance (DOF) in removing the value-added tax (VAT) exemption being enjoyed by the elderly and persons with disabilities (PWDs) and the imposition of excise taxes on petroleum products.

In a radio interview over DZMM, Alvarez said the House of Representatives would not allow such offsetting measures in the tax proposal that seeks to reduce the personal income tax rate.

READ: Alvarez says House to study if DOF tax reform package ‘doable’ 

He said the Lower House would insist on its independence, vowing not to become the “rubber stamp” of the administration.

“‘Yung Kongreso, ‘yung House of Representatives pala, hindi po ito magiging rubber-stamp ng administrasyon. I said before na rest assured na kami po ay magiging always on the side of the people,” Alvarez said.

(The House of Representatives will not be a rubber-stamp of the administration. I said before that rest assured, we will always be on the side of the people.)

“Hindi po natin papayagan na itong mga ganitong panukala ay aming palulusutin dito sa House of Representatives (We will not let these types of proposals get through in the House of Representatives),” he added.

Alvarez said it seems like the DOF officials were too lazy to come up with better solutions to the tax revenue hole that would be brought about by the reduction of personal income tax, such as improving the efficiency of tax collections.

“Pinag-aralan ko yung proposal nila kahapon, at napansin ko nga itong proposal, karamihan naman ng mga nasa Department of Finance ngayon ay dati pa rin iyan, nandiyan na sila. Siguro tinatamad na lang sila upang mag-isip kung ano pa ‘yung mga magandang tax measures. Ito ‘yung mga pinakamadali siguro na gagawin,” Alvarez said.

(I studied their proposal yesterday and I noticed that those who are with the Department of Finance now are the same ones from before. Maybe they got lazy in thinking of other good tax measures. This may be the easiest way.)

“Napansin ko naman kahapon, wala namang provision doon na mag-aadress doon sa efficiency doon sa tax collection… Tutukan din natin iyan dahil maraming nasasayang, marami ring nakaka-evade ng tamang pagbayad ng buwis. Wala akong nakitang probisyon na ganoon,” Alvarez added.

(I noticed yesterday that there was no provision there that would address the efficiency of tax collection… Let’s focus on that too because a lot goes to waste, many people are able to evade paying taxes. I didn’t see any provision on that.)

Asked if he would not let the DOF proposal to be passed in the Lower House, Alvarez said: “Rest assured that the House of Representatives will always be on the side of the people.

In the DOF tax reform package submitted to the House ways and means committee Tuesday night, the measure seeks to repeal the laws which have been allowing senior citizens and PWDs VAT exemption—Section 4 of the Expanded Senior Citizens Act and Section 32(a) of the Magna Carta for Persons with Disability.

The bill seeks to repeal the tax perks of the elderly and PWDs as an offsetting measure as it seeks to lower the personal income tax rate. The bill also seeks to impose additional excise tax on petroleum products.

READ: DOF tax package to remove VAT exemptions on elderly, PWDs

In repealing Section 4 of the Expanded Senior Citizens Act or Republic Act 9994, the DOF’s proposed package would remove the twenty percent discount and VAT exemption being enjoyed by senior citizens on the following services and products:

• Medicine
• Professional fees of attending physicians and licensed professional health
• Medical and dental services
• Diagnostic and laboratory fees
• Actual fare on land, public utility, mass transit, domestic air and sea travel
• Hotels and similar lodging establishments, restaurants and recreation centers
• Theaters, cinema houses and concert halls, circuses, leisure and amusement
• Funeral and burial services for the death of senior citizens

Meanwhile, the bill would repeal Section 32(a) of the Magna Carta for Persons with Disability or Republic Act 10754, the latest amendment of which was just passed under the 16th Congress and signed into law by erstwhile president Benigno Aquino III.

The deletion of the provision effectively removes the following VAT exemption and 20 percent discount of PWDs on the following services and products:

• Fees and charges relative to the utilization of all services in hotels and similar lodging establishments; restaurants and recreation centers
• Admission fees charged by theaters, cinema houses, concert halls, circuses, carnivals and other similar places of culture, leisure and amusement
• Purchase of medicines in all drugstores
• Medical and dental services including diagnostic and laboratory fees, and professional fees of attending doctor
• Actual fare on land, public utility, mass transit, domestic air and sea travel
• Funeral and burial services for the death of the PWD

The bill also seeks to repeal Section 33(a) of the law, which allows for tax incentives to relatives of PWDs within the fourth degree of consanguinity with the PWDs considered as dependents.

The unnumbered bill seeks to amend the National Internal Revenue Code to impose two tax schedules in 2018 and 2019.

The DOF proposed tax schedule for 2018 is:

• Not over P250,000: zero percent
• Over P250,000 but not over P400,000: 20 percent of the excess over P250,000
• Over P400,000 but not over P800,000: P30,000 + 25 percent of the excess over P400,000
• Over P800,000 but not over P2 million: P130,000 + 30 percent of the excess over P800,000
• Over P2 million but not over P5 million: P490,000 + 32 percent of the excess over P2 million
• Over P5 million: P1.45 million + 35 percent of the excess over P5 million

In the DOF’s proposed tax schedule for 2019, the tax for personal income would further go down:

• Not over P250,000: zero percent
• Over P250,000 but not over P400,000: 15 percent of the excess over P250,000
• Over P400,000 but not over P800,000: P22,500 + 20 percent of the excess over P400,000
• Over P800,000 but not over P2 million: P102,500 + 25 percent of the excess over P800,000
• Over P2 million but not over P5 million: P402,500 + 30 percent of the excess over P2 million
• Over P5 million: P1,302,500 + 35 percent of the excess over P5 million

The bill also repealed the tax exemption on 13th month pay and other benefits not exceeding P82,000 in the public and private sector.

READ: Solons warn DOF tax reform package to pass on burden to consumers 

Finally, the bill would increase the excise taxes on petroleum products, including imposing new taxes on petroleum products that were previously not imposed with excise tax:

• Lubricating oils and greases – P10 per liter (from P4.5)
• Processed gas – P6 per liter (from P0.05)
• Waxes and Petrolatum – P10 per kilogram (from P3.5)
• Denatured alcohol – P6 per liter (from P0.05)
• Naptha, regular gasoline – P10 per liter (from P4.35)
• Leaded premium gasoline – P10 per liter (from P5.35)
• Unleaded premium gasoline – P10 per liter (from P4.35)
• Aviation turbo jet fuel – P10 per liter (from P3.67)
• Kerosene – P6 per liter (from zero)
• Diesel fuel oil – P6 per liter (from zero)
• Liquefied petroleum gas – P6 per liter (from zero)
• Asphalts – P6 per kilogram (from P0.56)
• Bunker fuel oil – P6 per liter (from zero) JE