Senator Loren Legarda filed a package of three complementary measures aimed at easing the cost burden on Filipino households by reforming the country’s value-added tax (VAT) system.

The proposed reforms seek to lower the general VAT rate, exempt essential goods and services from the tax, and address distortions in electricity billing, while maintaining 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.”

The first measure, Senate Bill No. 1851 or the Differentiated Value-Added Tax Rates Act, proposes reducing the general VAT rate from 12 percent to 10 percent. However, the current 12 percent rate would still apply to luxury, premium, and environmentally harmful goods and services.

Among the items that would remain subject to the higher rate are high-value motor vehicles, premium residential real estate, designer goods, private aircraft and watercraft, sin products, and hazardous products.

“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.”

A second measure, Senate Bill No. 1857 or the Murang Bilihin at Serbisyong Medikal Act, seeks to exempt a range of essential commodities, utilities, and medical services from VAT.

The proposed exemptions would cover over-the-counter medicines, first-aid supplies, canned goods, noodles, bread, cooking oil, laundry soap, sanitary products, as well as 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.”

The third measure, Senate Bill No. 1859, clarifies the VAT treatment of electricity subsidies and statutory charges under the Electric Power Industry Reform Act (EPIRA).

The bill seeks to exclude lifeline subsidies for low-income households, senior citizen discounts, and cooperative capital expenditure contributions from VAT computation. Legarda said the proposal aligns with a doctrine from the Supreme Court of the Philippines: funds merely entrusted to utilities and not benefiting them directly should not be subject to VAT.

“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 said the three measures are intended to work together as a comprehensive reform package designed to protect household purchasing power while preserving government revenues through stronger oversight and efforts to plug 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 senator said the proposals also aim to restore progressivity in the tax system by easing the burden on basic consumption while maintaining higher VAT rates on luxury and non-essential goods.

Legarda is pushing for the swift passage of the measures, saying the reforms would deliver targeted relief to households, correct structural distortions in the tax system, and strengthen the fairness of the country’s VAT framework.

-Paraluman News