Subsidies serve PWD interests better than unfeasible VAT exemptions
The Department of Finance advised for more feasible and responsible measures in light of the passage of House Bill 1039, exempting persons with disabilities (PWDs) from paying the value-added tax (VAT) on certain goods and services.
DOF Undersecretary Jeremias N. Paul, Jr. of the Domestic Finance Group said, “Granting targeted subsidies through the expenditure approach 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.”
The government’s commitment towards the PWD sector has always been clear and resolute: PWDs can draw from different benefit programs of government agencies. Further, the DOF is working in earnest to boost revenues to increase funding for these programs. Thus the DOF commends the initiative of the bill author, but 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. 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.
On the part of the establishments, the proposal will require separate accounting records for the purchases of goods and services by PWDs, in addition to that of senior citizens. The proposed VAT exemption therefore leads to an additional tax compliance burden for businesses.
Further, PWDs account for about 1.5% of the total population. This means the proposed exemption would result in an estimated revenue loss of P1.12 billion, according to official estimates. However, this figure can increase since the proposed exemption poses aforementioned administrative challenges in monitoring whether the purchases are for the exclusive use of and enjoyment of 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.
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, transparent relief through targeted subsidies.
The DOF is fully convinced that the only way to empower the PWD sector is to provide such relief while preserving our fiscal health—if only to generate more revenues to fund systematic programs and solutions to serve these sectors best.
