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The Erwin Tulfo VAT proposal has drawn national attention as the senator pushes to reduce the value-added tax from 12 percent to 10 percent to ease rising prices.

Amid persistent inflation and the continued rise in the cost of basic goods, Erwin Tulfo has filed a proposed measure seeking to lower the country’s Value-Added Tax (VAT) from 12 percent to 10 percent—an initiative he says is aimed at providing immediate relief to Filipino consumers struggling with everyday expenses.

The proposal, introduced in the Senate as part of a broader effort to cushion households from soaring prices, has quickly drawn public attention as Filipinos grapple with higher food, fuel, and utility costs. Supporters say the move could help increase consumers’ purchasing power, while critics caution about its potential impact on government revenue.

Tulfo said the VAT reduction is meant to address what many Filipinos consider the most pressing economic issue today: the rising cost of living. Inflation, he noted, has eroded household budgets, particularly for low- and middle-income families who spend a large portion of their income on basic necessities.

According to the senator, even small reductions in prices can make a meaningful difference for ordinary consumers. “Every peso saved matters,” he said, stressing that lowering VAT could translate into cheaper goods and services across multiple sectors.

VAT is imposed on a wide range of products and services in the Philippines, making it one of the government’s biggest sources of revenue—but also one of the most felt taxes among consumers.

Under the proposed measure, the VAT rate would be reduced from 12 percent to 10 percent. Tulfo said the goal is to provide immediate, broad-based relief without requiring complex subsidy mechanisms.

If enacted, the reduction could potentially lower prices of VAT-covered goods and services, including food items not classified as basic commodities, household products, transportation services, and utilities.

Economists note, however, that the actual impact on consumer prices would depend on whether businesses pass on the tax savings to customers or absorb them into operating margins.

Proponents of the VAT cut argue that a lower tax rate would stimulate consumer spending, which could in turn support economic growth. With more disposable income, households may be more willing to spend, helping small and medium-sized enterprises recover from lingering economic challenges.

Business groups have expressed mixed reactions. Some welcome the proposal, saying it could boost demand and improve sales volumes. Others remain cautious, citing uncertainties about implementation and whether the tax cut would be enough to offset rising production and logistics costs.

Consumer advocates, meanwhile, stress the importance of strict monitoring to ensure that businesses actually reduce prices if VAT is lowered.

Critics of the proposal point to the potential loss of government revenue, noting that VAT collections fund essential public services such as healthcare, education, and infrastructure projects.

Finance experts warn that any reduction in VAT must be carefully studied to avoid widening the budget deficit or forcing the government to raise other taxes to compensate for lost income.

Tulfo has acknowledged these concerns, saying the proposal is open to refinements and fiscal impact assessments. He emphasized that protecting consumers should go hand in hand with maintaining fiscal stability.

The Philippines previously adjusted VAT rates as part of broader tax reforms, most notably during the implementation of the Expanded Value-Added Tax law. Historical data show that VAT changes can have both short-term and long-term economic effects, depending on global conditions and domestic fiscal policies.

Some analysts suggest that targeted tax relief—such as zero-rating specific essential goods—may be more effective than across-the-board VAT cuts. Others counter that a general reduction is simpler to implement and benefits a wider segment of the population.

The proposal has sparked debate on social media, with many Filipinos expressing support for measures that could lower prices. Others remain skeptical, questioning whether VAT reductions will truly be felt at the consumer level.

“Kung bababa talaga ang presyo, malaking tulong ito,” one netizen commented. Another urged lawmakers to ensure that businesses comply and do not use the tax cut as an excuse to maintain high prices.

The mixed reaction highlights growing public concern over inflation and the demand for concrete, immediate solutions.

The proposed bill is expected to undergo committee hearings, where lawmakers, economic managers, and stakeholders will weigh in on its feasibility and potential consequences. These discussions will likely focus on fiscal sustainability, price transmission mechanisms, and safeguards against abuse.

Tulfo said he is open to dialogue and data-driven revisions, adding that the proposal is meant to spark discussion rather than impose a one-size-fits-all solution.

As inflation continues to challenge households, policymakers face the difficult task of balancing consumer relief with long-term economic stability. Tax measures like VAT reductions are among several options on the table, alongside subsidies, price controls, and targeted social assistance programs.

Analysts say any decision must consider not only immediate relief but also the broader implications for government finances and investor confidence.

For now, Tulfo’s VAT reduction proposal stands as part of a growing conversation on how best to address rising prices in the country. Whether it gains enough support in the Senate remains to be seen, but it has already placed the issue of tax relief firmly back in the public spotlight.

As deliberations move forward, many Filipinos will be watching closely, hopeful that any outcome will bring tangible relief at a time when every peso counts.