The Philippine Senate is considering legislation that would cut the country's value-added tax from 12% to 10%, with proponents arguing the move would ease the financial burden on low-income households, boost purchasing power, and sharpen the country's economic edge against regional rivals — while a presidential override clause aims to keep the public finances on track.
The Philippine Senate is reviewing draft Bill No. SBN-1916, known as the VAT Reduction Act, was introduced on 26 February 2026.
The VAT Reduction Act proposes lowering the Value-Added Tax (VAT) in the Philippines from 12% to 10% to align with the constitutional mandate for progressive taxation. The bill proposes lowering the value-added tax (VAT) rate from 12% to 10% on the sale of goods or properties, the importation of goods, and the provision of services, including digital services.
The legislation argues that the current high rate is regressive, places a heavy burden on low-income households, and makes the country less economically competitive compared to its neighbours. By implementing this decrease, the bill aims to increase disposable income, stimulate business growth, and enhance purchasing power for average citizens.
To maintain fiscal responsibility, the act includes a provision allowing the President to temporarily restore the 12% rate if the national budget deficit exceeds specific targets.
Ultimately, the proposal seeks to balance immediate economic relief for families with the long-term necessity of maintaining national financial stability.
The Act proposes amendments to three key provisions of the National Internal Revenue Code of 1997. Section 106(A) would reduce the VAT rate on the sale of goods or properties to 10%, Section 107(A) would lower the VAT on the importation of goods to 10%, and Section 108(A) would apply a 10% VAT rate to the sale of services—including digital services—as well as the use or lease of properties.
The implementing rules must be issued by the Department of Finance and the Bureau of Internal Revenue within 60 days after the law takes effect.
The Act will become effective 15 days after its publication in the Official Gazette or in a newspaper of general circulation.
