Senator Erwin Tulfo has drafted a bill proposing a reduction in the country’s value-added tax (VAT), levied on various goods and services, cutting it back to its original rate of 10 percent from the current 12 percent. He cited inflation and the bill’s potential to boost economic growth.
The VAT Reduction Bill, filed in November 2025, seeks to undo some of the changes to the Philippines’ tax code implemented by the Reformed VAT Law. The law, passed under former President Gloria Macapagal Arroyo in 2005, raised the VAT to 12 percent. Inquirer reports that VAT collections shot up from P156.7 billion in 2005 to P259.8 billion in 2006, following the reforms. With the law, the Philippines’ VAT became the highest in Southeast Asia, with Singapore’s Goods and Services Tax at nine percent and Malaysia’s at six percent.
Tulfo argues that the country’s VAT “disproportionately burdens low- and middle-income households,” where the rising costs of goods remain a concern. In the bill’s explanatory note, the lawmaker says that reducing the tax will ease the cost of living.
“Unlike redistributive programs funded through other forms of taxation, which may suffer from leakages and administrative inefficiencies, lowering VAT immediately increases household purchasing power and stimulates consumption,” Tulfo added. The bill also allows the president, with the recommendation of the finance secretary, to revert the VAT to 12 percent in any fiscal year if the country falls short of its economic targets.
In a Rappler column, tax reform advocate and Asian Consulting Group Chief Tax Advisor Mon Abrea said that Filipino households could save up to P7,000 a year on average if a tax reduction is pushed, which may be helpful for working households. But he also noted that essential goods and services like unprocessed food, public education, and medicine are already tax-exempt, so spending on such items are not likely to be affected. He also warned that the government could lose as much as P200 billion in annual revenue.
