SEN. Mark Villar has filed Senate Bill 1916, which aims to lower the value-added tax (VAT) imposed on the sale of goods, services and imports.
If enacted, the measure will amend Sections 106(A), 107(A) and 108(A) of the National Internal Revenue Code of 1997.
In his explanatory note, Villar cited the mandate under Article VI, Section 28(1) of the 1987 Constitution of the Philippines, which directs Congress to establish a progressive taxation system — one in which tax rates increase according to a taxpayer’s ability to pay.
Villar said VAT, by design, is considered a regressive tax because it is imposed uniformly on consumption regardless of income level.
”VAT disproportionately burdens lower-income persons and hinders an effective redistribution of wealth,” the senator said.
He added that the current tax structure can diminish purchasing power, narrow business profit margins, and discourage entrepreneurship and capital investment — factors that could slow economic growth.
The Philippines currently imposes a 12-percent VAT, one of the highest consumption taxes in Southeast Asia. By comparison, Indonesia imposes an 11-percent VAT, Vietnam imposes a 10-percent VAT and Singapore has a 9-percent goods and services tax.
According to Villar, reducing the VAT rate could help improve the country’s competitiveness within the region.
The proposed reduction is projected to increase the annual disposable income of the average Filipino household by about P8,000, potentially stimulating consumer spending and supporting business expansion.
Supporters of the bill say the tax cut could encourage job creation, entrepreneurship and broader economic activity, particularly as households gain more spending power.
To address concerns about possible revenue losses, the bill includes a fiscal safeguard. It authorizes the president to temporarily restore the VAT rate to 12 percent for a specific year if the projected fiscal deficit exceeds the target set by the Development Budget Coordination Committee as a percentage of the country’s gross domestic product.
The provision aims to ensure fiscal stability while allowing the government flexibility in managing budget deficits.
Senate Bill 1916 will undergo committee review, public hearings and plenary deliberations before it can advance to the House of Representatives for approval.
