Press Release
December 15, 2015

Bicam OKs bills granting tax breaks to PWDs and local water districts

A Senate- House panel which fine-tuned bills granting tax breaks to persons with disabilities (PWDs) and local water districts today approved both measures for approval by both chambers and "possible signing by President Aquino before Christmas day."

Senate President Pro-Tempore Ralph Recto, principal author of the two bills, said the Bicameral Conference Committee, "in a quick but productive meeting" this morning, voted to submit the bill providing "a raft of tax discounts" for plenary approval later today.

The first bill exempts PWDs from paying the Value Added Tax (VAT) on top of the 20 percent discount they are entitled to on certain goods and services.

It also allows a "relative of a PWD", up to the 4th civil degree of consanguinity or affinity, to claim a tax deduction of P25,000 in his annual income tax.

The bill on local water districts, on the other hand, removes the conditions for the condonation of unpaid income taxes due from them.

"This will free up money which local water districts can only use in improving the quality or expanding the reach of their services,"Recto said.

Recto said the proposed tax breaks for the handicapped would align these with the privileges seniors get under the Expanded Senior Citizens Act of 2010.

At present, under the Magna Carta for Disabled Persons, PWDs are entitled to a 20 percent discount on certain goods such as medicines, hospital and laboratory work, hotel stay, local transport fares and theatre admission. The Bicam committee added funeral services and burial expenses to the list of assistance to be given to PWDs. "So a brother caring for an autistic sibling, or a child who is taking care of a parent who has gone blind, can claim the tax deductible amount of P25,000," Recto said.

Recto said the bill is in response "to the reality that millions of families today have turned their residences into homes for the aged or infirm."

Recto conceded that the P25,000 which can be deducted from final tax bill "barely covers the cost of caring for a PWD."

"It is, however, a good start. At least we're ending the government embargo on this kind of tax credit," Recto said.

According to the 2010 Census of Population and Housing released in 2013, the Philippines has 1.443 million PWDs, or 1.57 percent of the country's total.

Recto said the bill condoning certain taxes of community-owned local water districts removes the administrative bottlenecks in making this claim.

In 2010, Congress passed what would become Republic Act 10026 which grants income tax exemptions to local water districts, in effect extending to them the same privilege government-run utilities like the Metropolitan Waterworks and Sewerage System (MWSS) was already enjoying.

In addition, RA 10026 condoned the tax obligations of a local water district from August 1996 up to the time RA 10026 took effect in March 2010.

It, however, imposed the condition that water districts who wish to apply for condonation must prove its financial incapacity to the Bureau of Internal Revenue (BIR).

They were also required to submit to Congress a program for "internal reforms."

Despite the submission by LWDs of these documents, the BIR did not issue the corresponding revenue regulations, rendering the law inoperable, Recto said.

What the tax agency instead issued was Revenue Memorandum Circular 68-2012, which enumerated the procedure, and the documentary requirements for condonation.

Despite these, 161 water districts "diligently applied for condonation," with 78, whose unpaid taxes amounted to P842 million, able to comply with the documentary requirements.

Recto said under RA 10026, the condoned taxes can only be spent by water districts for the improvement of their services like the purchase of equipment.

"In the end, the people will benefit because taxes foregone are mandated to be plowed back to them," Recto said.

When signed into law, the measure "will help the 514 local water districts that work round-the-clock so that 20 million Filipinos will have clean water to drink."

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