House bill filed seeking return of VAT rate to 10%

A reduction of the value-added tax (VAT) on goods and services to 10% from the previous rate of 12% has been proposed in the House of Representatives to ease inflation or the rate of increase on commodity prices. 

Batangas First District Representative Leandro Leviste made the submission through his House Bill 4302, or the proposed VAT Reduction Act of 2025.

Citing data from the Department of Finance and the Bureau of Customs, Leviste said the government's VAT collection has already increased exponentially from P156.67 billion in 2005—when the VAT was first increased from 10% to 12%—to as much as P1.20 trillion in 2024.

This P1.20 trillion, Leviste said, is way above the P200 billion that the government will lose with the passage of his measure seeking to peg the VAT to the old rate of 10%.

"This bill is about giving ordinary Filipinos a break. The VAT is regressive, hitting the poor and middle class the hardest. Lowering it makes our tax system more progressive," Leviste said during the Finance department's briefing on its collection performance before the House ways and means panel.

"Reducing VAT is a direct and efficient way to address inflation. It avoids leakages and cuts administrative costs associated with redistribution," Leviste added.

Further, Leviste said the Philippines' 12% VAT is already the highest in Southeast Asia compared with Vietnam and Cambodia (10%),  Indonesia (11%), Singapore (9%) and Thailand (7%), as well as Malaysia, Laos, and Myanmar (5 to 7%).

Leviste's proposal also allows the President, upon the recommendation of the Department of Finance and the Development Budget Coordination Committee (DBCC), to temporarily restore the VAT rate to 12% if the government's deficit target exceeds projections.

In response, Finance Undersecretary Karlo Adriano said the Finance department will consider Leviste's suggestion.

"As mentioned by our Secretary (Ralph Recto), we're willing to take a look at this proposal," Adriano said.

During the same House ways and means panel hearing, the Finance department also announced an amnesty program covering unpaid internal revenue taxes from 2007 to 2024 to alleviate the plight of the taxpayers.

DOF Assistant Secretary Nina Asuncion said the new amnesty program will cover income, withholding, capital gains, donor's, excise, and documentary stamp taxes.

For the Bureau of Customs, it would include VAT and excise taxes on importation, regardless of whether assessments had been issued. Eligible taxpayers would gain immunity from penalties, confidentiality of disclosures, and exemption from Bureau of Internal Revenue audits for the covered years.

"This measure revives a provision previously vetoed by former President Rodrigo Duterte in 2019, which left only the estate tax amnesty in place," Asuncion said.

"This is an opportunity for taxpayers to start fresh while contributing to fiscal recovery," the DOF added. — VDV, GMA Integrated News