Senator Loren Legarda has filed three complementary measures seeking to reform the country’s value-added tax (VAT) system to ease the burden on Filipino households now reeling from the oil price hikes due to the conflict in the Middle East.

Legarda said the proposals seek to lower the general VAT rate, exempt basic goods and services, and correct distortions in electricity billing to ensure fairness and fiscal responsibility.

“Relief must be responsible. 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,” Legarda said.

The senator filed Senate Bill No. 1851, or the Differentiated Value-Added Tax Rates Act, which reduces the general VAT rate from 12% to 10% while retaining the 12% rate on luxury, premium, and environmentally harmful goods and services.

High-value motor vehicles, premium residential real estate, designer goods, private aircraft and watercraft, sin products, and hazardous products will remain subject to the higher rate.

“Why should basic goods and luxury items pay the same VAT?” Legarda noted.

“Poor households spend a much larger share of their income on food and essential needs. When we tax survival and luxury at the same rate, the burden falls disproportionately on those with the least capacity to absorb it,” she stressed.

She also filed Senate Bill No. 1857, or the Murang Bilihin at Serbisyong Medikal Act, which seeks to exempt basic commodities, utilities, and medical services from VAT.

The measure covers items such as over-the-counter (OTC) medicines, first-aid supplies, canned goods, noodles, bread, cooking oil, laundry soap, sanitary products, residential water and electricity consumption within lifeline thresholds, and basic internet access.

“Electricity for basic household use is not a luxury; it is a daily necessity that keeps our homes functioning and our children studying,” Legarda said.

“If we are serious about easing the burden on Filipino families, we must ensure that the tax system does not unnecessarily inflate their power bills,” she said.

Meanwhile, in filing Senate Bill No. 1859, Legarda clarifies the VAT treatment of electricity subsidies and statutory charges under the Electric Power Industry Reform Act (EPIRA). It excludes lifeline subsidies for low-income households, senior citizen discounts, and cooperative capital expenditure contributions from VAT computation.

This is consistent with the Supreme Court (SC) doctrine that entrusted funds not benefiting utilities should not be taxed.

“These amounts are already contributions of our citizens to good public causes, missionary electrification, cleaner energy, and lifeline rates for the poor. Let us not increase the burden by taxing these contributions again,” Legarda said.

The lawmaker said the three bills are designed to work together as a comprehensive reform package. She said that by lowering the general VAT rate, exempting essentials, and ensuring fair treatment of electricity charges, it would protect household purchasing power while maintaining fiscal responsibility through stricter oversight and plugging of tax leakages.

“Lower VAT for ordinary Filipinos, stable revenues for government, that is the balance we are striking…In a time of rising costs, we must cushion families wisely and sustainably,” she stressed.