VAT rate cut possible if exemptions curbed — DoF

FINANCE Secretary Frederick D. Go said his department is seeking to avoid revenue-eroding  measures, but added that the proposed cut in the value-added tax (VAT) rate is possible if accompanied by the removal of VAT exemptions.

“The Department of Finance (DoF) is naturally predisposed not to want revenue-eroding measures. But of course, everything is possible,” he told reporters on the sidelines of a Palace briefing on Monday.

“Pwede naman (It’s possible). But we have to remove all the VAT exemptions,” Mr. Go said when asked whether he supported a reduction of the current VAT rate.

VAT is a 12% tax imposed on sales, leases, barter, and imports of goods and services. VAT collections account for around a fifth of the BIR’s total revenue.

House of Representatives and Senate legislators have floated a VAT rate of 10%, which could complicate government fiscal consolidation efforts.

Senator Erwin T. Tulfo’s Senate Bill No. 1552 aims to return the VAT rate to the original 10%, aligning with the bill filed by Batangas Rep. Leandro Antonio L. Leviste last year.

“One of the reasons why we have a low VAT efficiency is that there are so many exemptions to  VAT,” Mr. Go said.

“Also, if that means reducing revenue for the country, we should also correspondingly reduce expenditures,” he said.

In a 2022 report, the International Monetary Fund expressed support for the removal of Philippine exemptions and zero ratings to increase revenue, including those for senior citizens, who are entitled to a 12% VAT exemption under the Expanded Senior Citizens Act.

Mr. Go added that among the many targets the government monitors, the most important to him is the fiscal deficit target.

The government aims to bring down the deficit to P1.65 trillion, or 5.3% of gross domestic product, in 2026, and eventually to P1.55 trillion, equivalent to 4.3%, by 2028.

The Bureau of the Treasury reported that revenue collections stood at P4.15 trillion in the first 11 months, running ahead of the P4.1 trillion year-earlier pace.

At the same briefing, Executive Secretary and former Finance Secretary Ralph G. Recto said the government will issue a budget call soon to kick off the drafting of the 2027 budget.

“We’ll make a budget call soon, so the government can start drafting the 2027 budget. But for the meantime, let us first focus on executing the 2026 budget,” Mr. Recto told reporters.

President Ferdinand R. Marcos Jr. signed the record P6.792-trillion national budget for 2026 on Monday. — Aubrey Rose A. Inosante