A first-term legislator is pushing for the passage of a measure reducing the value-added tax (VAT) on goods and services to 10 percent from the current 12 percent rate.
Batangas first district Rep. Leandro Legarda Leviste filed
House Bill (HB) 4302, or the proposed VAT Reduction Act of 2025, says reducing VAT is a direct and efficient way to address inflation.”
“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,” said Leviste in filing his bill.
The measure, if passed, 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 eightfold, 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.
The Philippines currently imposes the highest VAT rate in Southeast Asia at 12 percent.
By comparison, Vietnam and Cambodia levy 10 percent, Indonesia 11 percent, Singapore 9 percent (GST), and Thailand 7 percent.
Malaysia, Laos, and Myanmar impose VAT rates of between 5 to 7 percent.
Leviste argued that lowering VAT would make the Philippines more competitive in the region while boosting domestic consumption.
The bill also 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.
“Instead of paying P120 in tax on groceries worth P1,000, Filipinos could keep an extra P20 to spend on other needs, ” Leviste said.
The Department of Finance, headed by former legislator Ralph Recto, expressed openness to Leviste’s proposal.
“As mentioned by our Secretary (Ralph Recto), we’re willing to take a look at all of these proposals; we are willing to take a look at this,” said We are willing to take a look at the proposal.
Finance Undersecretary Karlo Adriano said in response to Leviste’s proposal.
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 central bank’s target.
“Reducing VAT is a direct and efficient way to address inflation. It avoids leakages and cuts administrative costs associated with redistribution,” Leviste explained.
The proposal is expected to spark debates in Congress, with fiscal managers cautioning about its impact on revenue collection.
Still, Leviste argues that increased consumption and improved tax compliance could offset much of the shortfall.
