Bill cutting VAT to 10% amid oil-driven price surge filed

SENATOR Paolo Benigno A. Aquino IV has filed a bill seeking to cut the value-added tax (VAT) to 10% from 12% to ease the burden on households as surging oil prices linked to the Middle East war push up the cost of living.

Filed on Thursday, Senate Bill No. 2047 proposes changes to key provisions of the National Internal Revenue Code of 1997 to lower VAT on goods and services.

Mr. Aquino said the measure could support economic recovery while making prices more manageable for consumers, particularly lower-income households.

“While VAT has been an important source of government revenue, its uniform application means that it takes up a larger share of the income of poorer households,” he said in the bill’s explanatory note. “In times of crisis, this regressive impact becomes even more pronounced.”

The proposal comes as fuel-driven inflation continues to ripple through the economy following the US-Israel war on Iran that began on Feb. 28 and disrupted global oil markets.

Since March, the government has rolled out subsidies for the transport and agriculture sectors to cushion the impact of higher fuel costs, which have driven up prices of food and other basic goods.

Mr. Aquino said a VAT reduction would complement these targeted support measures by providing broader relief to consumers.

Other lawmakers have also pushed tax relief on fuel, with some proposing to suspend VAT specifically on petroleum products.

Senator Lorna Regina B. Legarda earlier filed Senate Bill No. 2043, which seeks to suspend or reduce VAT on fuel, while calling on the administration to clarify its policy direction.

Senator Maria Imelda R. Marcos has likewise backed a suspension of fuel VAT to ease costs for municipal fisherfolk and commercial fishers registered with the Bureau of Fisheries and Aquatic Resources.

However, Senator Panfilo M. Lacson warned of the potential fiscal impact of such measures, estimating that the government could lose about P320 billion in revenues, including about P119.3 billion from VAT removal on fuel products alone.

The Marcos administration has so far opted for more targeted interventions.

In March, President Ferdinand R. Marcos, Jr. was granted emergency powers allowing him to suspend excise taxes on petroleum products if global oil prices breach certain thresholds.

On April 13, the President approved the suspension of excise taxes on liquefied petroleum gas and kerosene, both commonly used by households, to help temper rising costs.

He has yet to decide whether similar tax relief will be extended to diesel and gasoline, which have a wider impact on transport and inflation.

The proposed VAT cut adds to a growing list of policy options being considered as the government balances the need to provide immediate relief with concerns over revenue losses and fiscal sustainability. — Kaela Patricia B. Gabriel