Representative Leandro Legarda Leviste has filed a measure at the House of Representatives to reduce the Philippines' value-added tax (VAT) rate from 12 percent to 10 percent, a move he says would return more than ₱250 billion to Filipino consumers and save each household approximately ₱9,000 per year.
House Bill No. 9915, formally titled the "VAT Reduction Act," was received by the House's Bills and Index Service on June 23, 2026. The bill amends Sections 106, 107, and 108 of the National Internal Revenue Code of 1997, covering the sale of goods and properties, the importation of goods, and the sale of services — including digital services.
Three Tax Code Provisions in the Crosshairs
The proposed two-percentage-point reduction applies uniformly across the three core VAT provisions of the tax code. Section 106 governs the sale or exchange of goods and properties; Section 107 covers the importation of goods; and Section 108 covers the sale of services, digital services, and the lease of properties.
All three provisions currently carry a 12 percent rate. Under House Bill 9915, each would be rolled back to 10 percent.
VAT Collections Rose Eightfold Since 2005 Rate Hike
According to the bill's explanatory note, VAT collections by the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) surged from ₱156.67 billion in 2005 to ₱1.20 trillion in 2024 — following the Expanded VAT Law that raised the rate from 10 to 12 percent. Rolling it back to 10 percent, the bill estimates, would trim collections by more than ₱250 billion annually.
Leviste argued that the revenue shortfall could be offset by cutting wasteful government spending or by imposing new taxes on only the wealthiest Filipinos. He described VAT as a regressive tax and said reducing it upholds the constitutional mandate for Congress to "evolve a progressive system of taxation."
Leviste Frames Cut as Alternative to Higher Spending
In a statement, Leviste positioned the bill as a direct counter to the government's proposed budget expansion — from ₱6.79 trillion in 2026 to ₱7.2 trillion in 2027, an increase of over ₱400 billion.
"Instead of increasing spending, we can reduce the VAT by two percent to save ₱250 billion, or ₱9,000 per Filipino family," Leviste said in Filipino.
Philippines Among Highest VAT Rates in Southeast Asia
The explanatory note benchmarks the Philippine rate against regional peers, noting that the country's 12 percent VAT is among the highest in Southeast Asia. Comparable rates include approximately 11 percent in Indonesia, 10 percent in Cambodia and Vietnam, 9 percent in Singapore (GST), 8 percent in Malaysia, 7 percent in Thailand and Laos, 5 percent in Myanmar, and 2.5 percent in Timor-Leste.
Reducing the rate, the bill argues, would improve the country's economic competitiveness within the region.
Congressional Research Body Backs the Reduction
The bill cites the Congressional Policy and Budget Research Department (CPBRD), which argued in January 2026 that lowering the VAT from 12 to 10 percent is advisable and likely to yield positive economic effects. The CPBRD noted that the net revenue impact could be partially offset through increased household consumption, greater formal-sector participation, and stronger private investment.
Refiled After 2025 Version Failed to Reach a Vote
Leviste disclosed that he first introduced a VAT reduction proposal in 2025, which drew CPBRD support but was never brought to a vote before the Congress adjourned.
"I am refiling this proposal, and I am hopeful there are still ways to get it approved," he said in Filipino.
Timeline for Implementation If Passed
Under the bill, the Department of Finance — in consultation with the BIR — would be required to issue implementing rules and regulations within 60 calendar days of the law taking effect. The Act itself would take effect 15 days after its publication in the Official Gazette or a newspaper of general circulation.
By the Numbers
- 12% → 10%: Proposed reduction in the VAT rate
- ₱156.67 billion: VAT collections in 2005, before the rate was raised to 12%
- ₱1.20 trillion: VAT collections in 2024
- ₱250 billion+: Estimated annual revenue foregone if the rate is cut
- ₱9,000: Projected yearly savings per Filipino household
- ₱6.79 trillion → ₱7.2 trillion: Proposed government spending increase from 2026 to 2027
- 60 days: Deadline for DOF to issue implementing rules after enactment
- January 2026: Date of CPBRD recommendation supporting the VAT cut
Why This Matters
VAT is one of the government's largest revenue sources, and a two-percentage-point cut would represent the first reduction since the rate was raised to 12 percent under the Expanded VAT Law. The bill directly affects the cost of goods, services, and imports paid by every Filipino household and business. With the CPBRD lending analytical support and Leviste citing constitutional grounds, the proposal is positioned as a substantive legislative debate rather than a routine filing — though it must survive committee review and plenary voting before it can become law.
Photo credit: Photo courtesy of the House of Representatives of the Philippines