Legarda moves to ease household burden with comprehensive VAT reform package

Senator Loren Legarda has filed three complementary measures aimed at easing the burden on Filipino households by reforming the country’s value-added tax (VAT) system. The proposals 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,” Legarda 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.”

Senate Bill No. 1851, or the Differentiated Value-Added Tax Rates Act, 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 asked. “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.”

Senate Bill No. 1857, or the Murang Bilihin at Serbisyong Medikal Act, exempts basic commodities, utilities, and medical services from VAT. Covered items include over-the-counter 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.”

Senate Bill No. 1859 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, consistent with the Supreme Court 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.

Legarda emphasized that the three bills are designed to work together as a comprehensive reform package. By lowering the general VAT rate, exempting essentials, and ensuring fair treatment of electricity charges, the measures aim to 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,” Legarda said. “In a time of rising costs, we must cushion families wisely and sustainably.”

Beyond immediate relief, the proposed reform package also seeks to restore progressivity in the country’s tax system. By easing the burden on basic consumption while retaining higher value-added taxes on luxury and non-essential goods, the measure reflects the principle that taxation should correspond to a taxpayer’s capacity to pay. In effect, the reforms aim to correct the regressive impact of a uniform VAT structure and ensure that the system works more equitably for ordinary Filipino families.

Legarda is pushing for the swift passage of the three measures to deliver targeted relief, correct structural distortions, and ensure that the country’s tax system is both fair and legally sound. (30)

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Legarda, isinusulong ang VAT reform package para maibsan ang pasanin ng mga kabahayan

Naghain si Senadora Loren Legarda ng tatlong magkakaugnay na panukalang batas na layong maibsan ang pasanin ng mga pamilyang Pilipino sa pamamagitan ng reporma sa value-added tax (VAT) system ng bansa. Nakapaloob dito ang pagbaba ng pangkalahatang VAT rate, pagbibigay ng exemption sa pangunahing bilihin at serbisyo, at pagtutuwid ng mga distorsyon sa pagbabayad ng kuryente upang matiyak ang patas at responsableng pamamahala sa pondo.

“Relief must be responsible,” pahayag ni Legarda. “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.”

Ang Senate Bill No. 1851, o ang Differentiated Value-Added Tax Rates Act, ay nagbababa ng pangkalahatang VAT rate mula 12% tungo sa 10% habang pinananatili ang 12% rate para sa mga luho, premium, at mga produktong nakasasama sa kapaligiran. Kabilang dito ang mamahaling sasakyan, premium na real estate, designer goods, pribadong eroplano at barko, sin products, at mga produktong mapanganib.

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

Ang Senate Bill No. 1857, o ang Murang Bilihin at Serbisyong Medikal Act, ay nagtatakda ng VAT exemption para sa pangunahing bilihin, utilities, at serbisyong medikal. Saklaw nito ang over-the-counter medicines, first-aid supplies, de-lata, noodles, tinapay, mantika, sabon panlaba, sanitary products, konsumo ng tubig at kuryente sa loob ng lifeline thresholds, at batayang 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,” saad ni Legarda. “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.”

Ang Senate Bill No. 1859 naman ay naglilinaw sa VAT treatment ng electricity subsidies at statutory charges sa ilalim ng Electric Power Industry Reform Act (EPIRA). Hindi isasama sa VAT computation ang lifeline subsidies para sa low-income households, senior citizen discounts, at cooperative capital expenditure contributions, alinsunod sa doktrina ng Korte Suprema na ang mga pondong hindi napapakinabangan ng utilities ay hindi dapat buwisan.

“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,” pahayag ni Legarda.

Binigyang-diin ni Legarda na ang tatlong panukalang batas ay dinisenyo upang kumilos bilang isang komprehensibong reporma. Sa pamamagitan ng pagbaba ng pangkalahatang VAT rate, pagbibigay ng exemption sa mga pangunahing pangangailangan, at pagtitiyak ng patas na pagtrato sa singil sa kuryente, layon nitong protektahan ang kakayahang pangkonsumo ng mga kabahayan habang pinananatili ang fiscal responsibility sa pamamagitan ng mas mahigpit na oversight at pagpigil sa tax leakages.

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

Higit pa sa agarang ginhawa, layon din ng reporma na ibalik ang progressivity sa tax system ng bansa. Sa pagbawas ng pasanin sa batayang konsumo habang pinananatili ang mas mataas na VAT sa luho at hindi pangunahing produkto, ipinapakita ng panukala ang prinsipyo na ang pagbubuwis ay dapat naaayon sa kakayahan ng nagbabayad. Sa ganitong paraan, tinutuwid ng reporma ang negatibong epekto ng uniform VAT structure at tinitiyak na mas patas ang sistema para sa karaniwang pamilyang Pilipino.

Isinusulong ni Legarda ang agarang pagpasa ng tatlong panukalang batas upang maihatid ang target na ginhawa, maitama ang mga structural distortions, at matiyak na ang tax system ng bansa ay patas at naaayon sa batas. (30)