DEPDev bucks proposal to cut VAT rate

Department of Economy, Planning and Development (DEPDev) Secretary Arsenio Balisacan, the Marcos administration’s chief economic planner, bucked proposals to slash the country’s value-added tax (VAT).

“Our goal, our major thrust is to ensure that our medium-term fiscal program goals are achieved, and that includes the decline in the deficit as a proportion of our GDP (gross domestic product) as well as the debt,” Balisacan told reporters in an interview.

“So what we want to avoid is any measures that erode our revenues,” the DEPDev chief said.

Last month, Batangas First District Representative Leandro Leviste filed House Bill 4302, or the proposed VAT Reduction Act of 2025, which would bring the VAT rate on goods and services to 10% from 12%.

Leviste's proposal, nonetheless, 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.

Meanwhile, Cavite 4th District Representative Francisco "Kiko" Barzaga filed House Bill 5119, which proposes an outright scrapping of the 12% VAT. 

Senator Erwin Tulfo also filed Senate Bill 1446, also known as “One-Month Tax Holiday of 2025,” seeking a one-time, one-month income tax holiday that will apply to individual taxpayers receiving compensation income.

The tax cut measures were proposed amid issues of corruption in infrastructure projects, involving government officials and contractors.

Balisacan echoed Finance Secretary Ralph Recto’s stance, who warned that lower VAT might "lead to massive revenue losses, resulting in less public services, and may force the government to borrow even for basic operations, such as personnel salaries."

The country’s chief economist said that the government should strengthen and improve the enforcement, implementation “of our tax measures.”

Balisacan added this would “ensure that we'll achieve this medium-term fiscal framework because that is what not only the credit rating agencies but the investors, domestic and foreign, are watching because those deficits, debt, fiscal sustainability are very much related to macroeconomic indicators like your interest rates and so on.”

Under the administration’s medium-term fiscal framework, the government is targeting to reduce the government’s fiscal deficit-to-GDP by 4% come 2028 from the pandemic high of 8.6% in 2021.

The Marcos economic team is also eyeing to bring down the debt-to-GDP ratio below 60% by 2028. –NB, GMA Integrated News