A proposal now before the Senate seeks to recalibrate the country’s consumption tax system as lawmakers revisit how fiscal policy affects daily household spending.
Erwin Tulfo has filed Senate Bill No. 1552, titled the proposed VAT Reduction Act of 2025, which would lower the value-added tax from 12 percent to 10 percent. The measure is framed as a way to stretch household budgets by reducing the tax applied to goods and services across the economy.
In the bill’s explanatory note, Tulfo anchored the proposal on constitutional principles, stating: “A reduction in VAT is therefore consistent with the Constitution’s mandate to establish a progressive tax system that promotes equity and social justice.”
The senator argued that trimming the VAT rate would immediately increase consumers’ purchasing power, allowing families to retain more of their income without relying on state assistance programs that may be weakened by inefficiency or corruption. He said this approach encourages spending activity rather than redistributive payouts.
Tulfo added that stronger consumer spending could help stimulate economic growth and eventually bolster tax collections, partially offsetting any revenue losses from the lower VAT rate as overall economic activity expands.
In pushing for the reduction, he cited regional comparisons, noting that the Philippines—alongside Indonesia—imposes the highest VAT rate in Southeast Asia at 12 percent, while neighboring economies levy consumption taxes ranging from 7 percent to 10 percent. “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,” the senator said in a statement.
To address fiscal risk, the proposed law includes a safeguard clause allowing the President to temporarily reinstate the 12 percent VAT upon the recommendation of the Secretary of Finance, if projections by the Development Budget Coordination Committee show the national deficit breaching prescribed limits for the year.
Separately, Elpidio “Kiko” Barzaga Jr. of Cavite’s 4th District has earlier filed a House measure calling for the complete removal of VAT, proposing to bring the rate down from 12 percent to zero.
