A new measure filed in the Senate is looking to slightly reduce how much consumers pay in value-added tax (VAT), as lawmakers revisit ways to address rising costs of living.
Senator Erwin Tulfo has filed Senate Bill No. 1552, also known as the proposed VAT Reduction Act of 2025, which seeks to lower the country’s VAT rate from 12% to 10%.
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According to the senator, the move is intended to help ease inflationary pressures and give Filipino households more spending room.
In the bill’s explanatory note, Tulfo said that lowering VAT aligns with the Constitution’s mandate to promote a progressive tax system that supports equity and social justice. The proposal, he added, aims to increase purchasing power by allowing consumers to keep more of their money instead of paying it in taxes.
Tulfo also explained that reducing VAT could encourage spending, which in turn may help stimulate economic activity. Rather than relying on government assistance programs that may face inefficiencies, he said the measure allows people to decide how to use their money based on their own needs.
The senator further pointed out that the Philippines currently has one of the highest VAT rates in Southeast Asia. Along with Indonesia, the country imposes a 12% VAT, while other neighboring nations have rates ranging from 7% to 10%. According to Tulfo, bringing the VAT rate down could help make the Philippines more competitive within the region.
“The VAT Reduction Bill will not only lighten the load for ordinary Filipinos but will also make our country more competitive among our Southeast Asian neighbors,” Tulfo said in a statement.
To address concerns about government revenue, the bill includes a safeguard provision. This allows the President to temporarily restore the VAT rate to 12%, upon recommendation of the Secretary of Finance, if the Development Budget Coordination Committee projects that the national deficit may exceed its prescribed limits for the fiscal year.
The proposal, however, is not without opposition. Economic managers have previously expressed reservations about cutting the VAT rate, citing possible revenue losses. Earlier statements from the Department of Finance and the Department of Economy, Planning, and Development have pushed back against similar proposals.
Separately, Cavite 4th District Representative Elpidio “Kiko” Barzaga Jr. has filed another measure that takes a more aggressive approach—seeking to remove VAT entirely by reducing the rate from 12% to zero.
As discussions around taxation, inflation, and economic growth continue, the proposed VAT Reduction Act adds to the broader debate on how best to balance consumer relief with government revenue needs. For now, the bill will go through the legislative process, where it will be reviewed, debated, and potentially amended before any decision is made.
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