Lower 10% VAT eyed

Under Leviste’s bill

MANILA, Philippines —  A billionaire lawmaker has filed a bill in the House of Representatives seeking to reduce the 12 percent value-added tax (VAT) to 10 percent – a move intended to ease inflation and ultimately lower the prices of basic commodities for Filipino consumers.

House Bill 4302, also known as the “VAT Reduction Act of 2025,” authored by Rep. Leandro Leviste of the first district of Batangas, proposes to slash by two percentage points the current VAT to 10 percent, providing relief to millions of Filipino households.

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

His proposal is expected to spark debates in Congress, with fiscal managers cautioning about its impact on revenue collection.

The neophyte lawmaker argues that increased consumption and improved tax compliance could offset much of the revenue shortfall.

The Philippines currently imposes the highest VAT rate in Southeast Asia at 12 percent.

By comparison, Asian neighbors Vietnam and Cambodia impose a 10-percent VAT; Indonesia, 11 percent; Singapore, nine percent (GST) and Thailand, seven percent.

Malaysia, Laos and Myanmar impose rates between five and seven percent.

Leviste maintained that lowering the VAT would make the Philippines more competitive in the region and at the same time boost domestic consumption.

The bill contains a safeguard clause allowing the President, upon the recommendation of the Department of Finance and the Development Budget Coordination Committee, to temporarily restore the VAT rate to 12 percent if the government’s deficit target exceeds projections.

Economic analysts note that inflation has consistently ranked as the top concern among Filipinos in recent surveys.

In July 2025, the Philippine Statistics Authority reported inflation at 4.1 percent, still above the target of the Bangko Sentral ng Pilipinas.

If passed, the measure could reduce annual VAT collections by over P200 billion – equivalent to an estimated P7,000 savings per household each year.

“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.

Since the Expanded VAT Law raised the rate from 10 to 12 percent in 2005, VAT collections have grown nearly eight-fold, from P156.67 billion in 2005 to P1.20 trillion in 2024, according to data from the Bureau of Internal Revenue and Bureau of Customs.