Senator Loren Legarda has filed three proposed measures to reform the Philippines’ value-added tax (VAT) system, aiming to ease the financial burden on households while ensuring fiscal responsibility. The bills seek to lower the VAT rate, exempt basic goods and services, and correct distortions in electricity billing.

MANILA — Senator Loren Legarda introduced a comprehensive VAT reform package in the Senate, consisting of three complementary bills designed to rebalance the country’s tax structure. The measures include reducing the general VAT rate from 12 percent to 10 percent, exempting essential goods and services from VAT, and revising the taxation of electricity-related charges to ensure fairness in billing.

Legarda explained that the reforms are intended to provide relief to ordinary Filipino families without compromising government revenues. “Relief must be responsible,” she said. “We can ease the burden on ordinary families without draining government funds. This reform lowers VAT where it matters most, on everyday consumption, while ensuring that those who can afford luxury and premium goods continue to contribute fairly.”

The first measure, Senate Bill No. 1851 or the Differentiated Value-Added Tax Rates Act, proposes lowering the general VAT rate to 10 percent. The second bill seeks to exempt basic goods and services such as food staples, medicines, and utilities from VAT, while the third bill addresses distortions in electricity billing by ensuring that consumers are charged fairly for power usage.

Legarda emphasized that the reforms are not only about lowering taxes but also about correcting inequities in the system. She noted that the current VAT structure disproportionately affects low-income households, who spend a larger share of their income on basic goods and services. By exempting essentials and adjusting electricity charges, the senator said the reforms would make the tax system more equitable.

The proposed measures have sparked discussions among economists and policymakers. Supporters argue that the reforms could help ease inflationary pressures and improve household purchasing power, while critics caution that lowering VAT rates might reduce government revenues needed for infrastructure and social programs. Legarda countered that the reforms are designed to balance relief with fiscal responsibility, ensuring that luxury goods and premium services remain taxed at higher rates.

If passed, the VAT reform package would mark one of the most significant changes to the Philippines’ tax system in recent years. The bills are currently under committee deliberation, with hearings expected to draw input from business groups, consumer advocates, and government agencies.