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One
can’t help but be disturbed and frustrated by the
practice of the country’s leading drugstore chain when
it comes to senior citizens paying with credit cards.
Simply
put, the chain declines to apply the senior citizen’s
20-percent discount on credit-card purchases. Granted
that some try to abuse the senior citizens law for
self-gain or profit, and merchants shoulder extra costs
on credit-card purchases, but retirees also rely on the
senior citizen’s discount for much-needed relief.
Take the
case of my in-laws, both retired. One just turned 71 and
the other is in her late 60s. Nowadays, for their daily
expenses they both rely on their meager pension as well
as financial support from their children. As additional
assistance, both have been given extension cards by
their children for necessary purchases like food and
medicine. Unfortunately, the cards are not of much help
since drugstores decline to grant their 20-percent
discount on such purchases. It’s bad enough that
medicine is very expensive locally. But to limit
retirees’ payment options for such items is criminal.
And
drugstores are not the only culprits. Some restaurants
and shops are equally inconsiderate. My in-laws point
out that the inconsistencies include some restaurants
computing the discount before VAT, and others computing
it after VAT, while one restaurant on Katipunan Avenue
grants the 20-percent discount only on the first P250 of
the bill.
Worse is
the experience of a friend’s dad, who was told by a
merchant in Taguig that the senior citizen’s discount
was available to consumers only on certain days of the
week.
I was,
likewise, stunned by the narration of a fellow newspaper
columnist, Ramon Farolan, himself a senior citizen, of
how he tried to purchase medicine with a credit card and
was refused the discount. And this was despite producing
a letter from Vice President Noli de Castro, who as
senator coauthored the Senior Citizens Act, clearly
stating that the discount should be given regardless of
the manner of payment.
What is
more unfortunate is that we seem powerless against such
inconsiderate merchants, despite their blatant disregard
for the law. Even the Supreme Court seems to favor them,
ruling not too long ago that the tax treatment of the
20-percent discount that drugstores give to senior
citizens entitled drugstores to a tax credit of
equivalent value that may be applied against their tax
liabilities, and not just a tax deduction from their
gross taxable income.
As I
noted in a previous column, by treating the 20-percent
discount as a tax credit instead of a tax deduction, as
the Supreme Court had ruled, it seemed that drugstores
were getting more out of the Senior Citizens Act, at the
expense of government coffers. Either way senior
citizens still get the same amount of discount, 20
percent. But by treating the discount as a tax credit,
the government ends up with lower revenues than by
treating the discount as a tax deduction.
The
so-called subsidy to seniors for medicine thus becomes a
heavier burden for the state, since it is obviously at
the expense of other basic public or social services.
And such tax benefit is seemingly enjoyed by drugstores
alone, with little or no social impact at all.
Assuming
Drugstore A and Drugstore B both made P100 million in
sales in taxable year 2006, and each closed the year
with P10 million in gross taxable income. Assuming also
that both drugstores extended equal amounts of
20-percent discounts to senior citizens at P1 million.
As a tax deduction, the 20-percent discount drops
Drugstore A’s gross taxable income to P9 million from
P10 million. And multiplying this by a corporate income
tax rate of 32 percent, Drugstore A’s tax payable comes
to P2.88 million, while its net income after tax is
P6.12 million.
But by
using the P1 million in discounts as a tax credit, as
allowed by the Supreme Court, Drugstore B’s tax payable
is a lower P2.2 million, and its net income after tax is
a higher P7.8 million. Tax due on its gross income of
P10 million is actually P3.2 million, but this is
reduced considerably by the P1-million tax credit.
Obviously, this is not Drugstore B’s fault. After all,
it simply enjoys what is due it under the law.
With the
current system, the government, in effect, subsidizes
the medicine purchases of senior citizens, and makes
drugstores pass-through conduits for the subsidy. And
while it may seem as if the drugstores are enjoying the
subsidy, this is actually passed on to senior citizens.
The issue is whether drugstores in turn get a free ride,
and enjoy undue advantage over other industries since
not all businesses can gain tax credits by granting
20-percent discounts to senior citizens.
But if
the law allows drugstores to enjoy considerable tax
advantages through 20-percent senior citizens discounts,
perhaps drugstores should also be compelled to offer the
same advantages to senior citizens themselves by
granting discounts even to credit-card purchases. This
is the legal and fair thing. Or do retirees still need
to secure a Supreme Court ruling on this?
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