Twin VAT cut bills and their impact on Filipino consumers
- Ray Talimio Jr.
- Jan 28
- 2 min read
TWO parallel measures field before the 20th Congress seek to reduce the value added tax (VAT) from 12 percent to 10 percent, reflecting a shared goal of easing consumer prices and improving the Philippines’ competitiveness within the Association of Southeast Asian Nations (Asean).
In the upper chamber of Congress, Sen. Erwin Tulfo filed Senate Bill (SB) 1552 or the VAT Reduction Act of 2025. The measure aims to increase household purchasing power by lowering the tax burden on goods and services that are currently subject to VAT. It also includes a safeguard mechanism that allows the president to restore the 12 percent rate if fiscal conditions deteriorate.
In the House of Representatives, Batangas 1st District Rep. Leandro Leviste filed House Bill (HB) 4302 with the same core objective. The House version highlights the importance of aligning Philippine consumption taxes with Asean peers such as Thailand, Vietnam, and Singapore, which maintain lower value added tax or goods and services tax (GST) rates.
A VAT reduction would directly affect goods and services that are presently vatable. These include appliances, electronics, clothing, furniture, restaurant meals, hotel services, transport services outside public utility fares, and processed food products such as marinated meats, sausages, jerky, and canned goods.
However, many basic necessities are already VAT-exempt under the existing law. These include food in its original state such as rice, fish, fresh meat, poultry, fruits, and vegetables. Water supplied by water districts, public education services, and basic medical services are also VAT-exempt. Export sales and certain services rendered to foreign clients remain zero-rated, meaning they are subject to zero percent VAT with input tax credits allowed.
Lowering the VAT rate would not affect the price of VAT-exempt goods directly, but it would reduce the cost of vatable items that families regularly purchase. This could help ease the burden of rising living expenses and improve the cash flow for micro, small and medium enterprises (MSMEs).
From a regional perspective, the Philippines’ current 12 percent VAT is higher than Thailand’s 7 percent, Singapore’s 9 percent, and Vietnam’s 10 percent. Reducing the rate to 10 percent would narrow this gap and strengthen the country’s appeal to foreign direct investments.
The success of this reform, however, depends on strong tax enforcement, reduced leakages, and disciplined public spending. Lower taxes must be matched by better governance to ensure fiscal stability.
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Ray G. Talimio Jr. is a certified public accountant and columnist on governance, economic policy, and public accountability. He is the past president and past chairman of the Board of the Cagayan de Oro Chamber of Commerce and Industry Foundation Inc., a national officer of the Philippine Institute of Certified Public Accountants, and former BIMP-EAGA Chairperson from 2023 to 2025.
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