Batangas 1st district Rep. Leandro Legarda Leviste has filed a measure that would slash the current value-added tax (VAT) rate from 12 percent to 10 percent in a bid to provide relief to millions of Filipino families.

Legarda Leviste, 32, filed for this purpose on Wednesday, Sept. 3 House Bill (HB) No. 4302, or the proposed VAT Reduction Act of 2025.

“This bill is about giving ordinary Filipinos a break. The VAT is regressive, hitting the poor and middle class the hardest. Lowering it makes our tax system more progressive,” the self-made billionaire said.

Although the measure has the potential to forego P200 billion in annual VAT collections, it will also equate to an estimated P7,000 savings per household each year.

The proposal is expected to spark debates in Congress, with fiscal managers cautioning about its impact on revenue collection. Still, Leviste argues that increased consumption and improved tax compliance could offset much of the shortfall.

Since the Expanded VAT Law raised the rate from 10 to 12 percent in 2005, VAT collections have grown nearly eight-fold, from P156.67 billion in 2005 to P1.20 trillion in 2024, according to data from the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC).

The Philippines currently imposes the highest VAT rate in Southeast Asia at 12 percent.

In comparison, Vietnam and Cambodia levy 10 percent, Indonesia 11 percent, Singapore 9 percent (GST), and Thailand 7 percent. Malaysia, Laos, and Myanmar impose rates between 5 to 7 percent.

Leviste argued that lowering VAT would also make the Philippines more competitive in the region while boosting domestic consumption.

The bill also contains a safeguard clause allowing the President--upon the recommendation of the Department of Finance (DOF) and the Development Budget Coordination Committee (DBCC)--to temporarily restore the VAT rate to 12 percent if the government’s deficit target exceeds projections.

Economic analysts note that inflation has consistently ranked as the top concern among Filipinos in recent surveys. In July 2025, the Philippine Statistics Authority (PSA) reported inflation at 4.1 percent, still above the central bank’s target.

“Reducing VAT is a direct and efficient way to address inflation. It avoids leakages and cuts administrative costs associated with redistribution,” Leviste explained.