Legarda pushes to exempt basic goods, services, and medicines from VAT and reduce the overall rate

Senator Loren Legarda filed two bills to lower prices on basic goods and services while expanding value-added tax (VAT) exemptions for essential necessities and medical services.

These measures represent concrete steps toward a more progressive national VAT system, easing the burden on low-income households.

“The measures will immediately provide relief to those with lower incomes, helping them survive day-to-day and build a better future for their families,” said Legarda.

“By treating healthcare and daily subsistence as fundamental rights rather than taxable transactions, the bills aim to reduce out-of-pocket costs for the most vulnerable sectors and ensure that life-saving medical care and basic necessities remain affordable,” she added.

Under Senate Bill No. 1851, or the Differentiated Value-Added Tax Rates Act, goods and services for poor and middle-class Filipinos will revert to a 10% VAT rate. Meanwhile, luxury goods (e.g., designer brands, jewelry, expensive watches, premium perfumes), high-value assets (e.g., fine art, antiques, private aircraft, luxury vehicles), “sin” products (e.g., alcohol, tobacco, vaping items), environmentally hazardous items (e.g., legal fireworks), and premium real estate (e.g., penthouse suites, luxury condominiums, exclusive club memberships) will remain at 12% VAT rate.

“This dual-rate system lowers the cost of living for most Filipinos while ensuring higher-income earners contribute a fairer share through slightly higher taxes on premium, luxury, and environmentally hazardous items,” Legarda remarked. “We also hope it encourages our countrymen to spend their hard-earned income prudently.”

Under Senate Bill No. 1857, or the Murang Bilihin at Serbisyong Medikal Act, Legarda seeks to fully exempt goods and services tied to daily subsistence and public health from VAT. This includes staple foods (e.g., canned fish, chicken, beef, milk, eggs, flour, rice, cooking oil, instant noodles, vinegar); household essentials (e.g., laundry soap, toilet paper, sanitary napkins, diapers); basic medical services (e.g., check-ups from doctors, dentists, licensed practitioners); over-the-counter medicines for fever, cough, flu, and body pain; and essential first-aid supplies (e.g., bandages, antiseptics including isopropyl alcohol and iodine solutions, thermometers).

Moreover, VAT exemption also extends to basic household electricity up to a monthly threshold (non-essential and industrial use remains taxable); and basic internet access for personal, educational, and essential communication (excluding premium digital services). By setting reasonable electricity and water consumption thresholds eligible for VAT exemption, the measure encourages responsible household use while easing pressure on energy and water systems.

“In this way, we can also encourage households to conserve energy and water to avail of the exemption,” Legarda said.

“Together, these bills protect the purchasing power of low- to middle-income earners without compromising the State’s revenue from non-essential and luxury goods,” concluded the four-term senator. (30)