Written by Cresencio T. Meneses, 31 July 2007
The population of people aged 60 and over is expanding worldwide. UN studies project that this demographic group will grow from 673 million in 2005 to 2 billion in 2050.
Inherent in the aging of the population are changes in economic and political policies relating to the treatment of the elderly.
Notwithstanding the fact that the Philippines has not yet experienced a significant graying of its population, UN estimates still project a significant growth in the percentage of older people in the Philippines from 3.5% in 2000 to 6.7% in 2025 and 14% in 2050.
It is worthy to note that the Philippine Constitution provides for both the private and public duty to take care of the elderly. Thus, under Article XV, Section 4, "the family has the duty to care for its elderly members, but the State may also do so through programs of social security."
Such are lofty ideals, but is Philippine society adequately prepared to meet the demands of caring for the elderly?
Caring for the elderly is a virtue which is deeply ingrained in the cultural fiber of Filipinos. However, we see this virtue slowly fading away as many Filipino families become loosely connected because of the increasing number of our Filipinos leaving the country for better opportunities abroad.
With the changing demographics and cultural norms in our society brought about by globalisation, it is not unthinkable that the State will carry the burden of caring for the elderly more in the future.
It was, perhaps, for this reason that Republic Act (RA) No. 7432 ("Senior Citizens Act") was amended by RA No. 9257 ("Expanded Senior Citizens Act of 2003") in 2003. RA No. 9257, which granted additional privileges and benefits to senior citizens, provides a glimpse of how our economic and political planners will face the economic and political realities of the graying population.
However, while the State assumes the primary responsibility in the care of the elderly, there are certain privileges and benefits granted under the law that impose a burden on private interests. One such important privilege is the grant of 20% discount on the purchase of medicines for the exclusive use or enjoyment of senior citizens, which has become a controversial issue because of its tax implication to the pharmaceutical industry.
In the recent case of Carlos Superdrug Corp. v. Department of Social Welfare and Development, the SC upheld the constitutionality of RA No. 9257 and stated in its decision that the State may burden private interests in the care of the elderly in the exercise of its "police power."
Thus, the ratio decidendi of the case provided:
"The Court is not oblivious of the retail side of the pharmaceutical industry and the competitive pricing component of the business. While the Constitution protects property rights, petitioners must accept the realities of business and the State, in the exercise of police power, can intervene in the operations of a business which may result in an impairment of property rights in the process.
"Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides the precept for the protection of property, various laws and jurisprudence, particularly on agrarian reform and the regulation of contracts and public utilities, continuously serve as a reminder that the right to property can be relinquished upon the command of the State for the promotion of public good.
"Undeniably, the success of the senior citizens program rests largely on the support imparted by petitioners and the other private establishments concerned. This being the case, the means employed in invoking the active participation of the private sector, in order to achieve the purpose or objective of the law, is reasonably and directly related. Without sufficient proof that Section 4(a) of RA No. 9257 is arbitrary, and that the continued implementation of the same will be unconscionably detrimental to petitioners, the Court will refrain from quashing a legislative act."
There is no argument that looking after the welfare and interests of the elderly, which is the rationale of RA No. 9257, is a very noble objective which should be a shared responsibility between the State and the private sector.
However, what appears to be disturbing is the pronouncement that the State may, in the exercise of its police power, intervene in the operations of private businesses to meet its objectives which may ultimately result in the impairment of private property rights.
Although the State’s exercise of its police power is not without limitations — since the same should not be arbitrary and unconscionably detrimental of the private property owners — the difficulty lies in striking a balance between caring for the elderly and protection of private property rights which are both guaranteed under the Philippine Constitution.
A case in point is the treatment of the 20% discount on sale of specific services and medicines to senior citizens. Section 4 of RA No. 9257 states that the 20% discount shall be considered as a deduction from the gross income of the seller, based on the net cost of the services or goods sold.
It should be noted that under RA No. 7432, the 20% discount was treated as a credit against the income tax liability of the seller. By treating the 20% discount as a deduction from gross income, the sellers do not get full tax benefit from the 20% discount which they are mandated by law to grant to senior citizens and this will therefore affect their profitability. Thus, this tax treatment is not favorable to the private business.
The burden of the cost for this benefit to the elderly is effectively shifted to the seller of goods and services and no longer a shared responsibility between the State and the private sector.
Given this situation, it is not farfetched that the affected private businesses will simply increase their selling price to recoup their lost income, which negates the objective of RA No. 9257.
The tax treatment of the 20% discount will be discussed in more detail in Economics and politics of an ageing population (Part 2)
