MANILA (October 9) — The Department of Finance (DOF) has raised the alarm over a proposal to reduce the country’s value-added tax (VAT) from 12% to 10%, warning that it could cost the government a staggering ₱330 billion in lost revenue each year—roughly one percent of the nation’s GDP.
Finance Undersecretary Karlo Adriano said the proposed cut threatens to derail the country’s fiscal consolidation efforts and weaken its ability to fund critical public services and infrastructure.
“This is not a small amount. Reducing VAT will create a massive hole in the government’s coffers,” Adriano stressed.
The DOF warned that the reduction would benefit high-income earners more than low-income households, undermining the measure’s supposed pro-poor intent. Instead, the agency is pushing for targeted interventions like cash transfers and subsidies to help vulnerable sectors without jeopardizing fiscal stability.
Fiscal consolidation—reducing the budget deficit and stabilizing the debt-to-GDP ratio—remains a top priority for the government. A VAT cut, the DOF cautioned, could reverse hard-won gains in revenue collection.
As the debate over VAT intensifies, the DOF is urging lawmakers to fully weigh the economic and social trade-offs of any tax reform before moving forward.
