MANILA – A senator is championing a groundbreaking bill to reduce the Expanded Value-Added Tax (EVAT) rate for the first time in nearly four decades, aiming to provide relief amid persistent living costs and boost consumer spending. The proposal—marking the first cut since EVAT’s implementation—seeks to lower the current 12% rate (set in 2006 under RA 9337) to 10% or lower, targeting essentials like electricity, fuel, and basic goods.
The push, led by a veteran lawmaker (details on sponsor emerging in committee hearings), revives debates on fiscal trade-offs: Potential revenue loss (~P100-200 billion annually) versus immediate household savings and economic stimulus. Proponents argue stable inflation (~1.9% average 2025) and strong collections create room for relief, while critics warn of deficit risks without offsetting measures.
Historical Context: Why “First in 37 Years”?
- VAT Origins: Introduced at 10% in 1988 under RA 7642 (Comprehensive Tax Reform Program).
- EVAT Expansion: RA 9337 (2005) broadened coverage (e.g., power, petroleum) and raised to 12% effective 2006—the last rate change.
- No cuts since; exemptions/zero-rating applied selectively (e.g., seniors, PWDs).
The bill heads to plenary debates in the 20th Congress, with hearings expected Q1 2026. If passed, it could mark a populist win but challenge fiscal targets.
Potential Impact Snapshot:
| EVAT Rate Scenario | Annual Revenue Loss Est. | Household Savings (Average) |
|---|---|---|
| Current 12% | Baseline | N/A |
| To 10% | ~P150-200B | P5,000-10,000/year |
| Targeted Cut (Essentials Only) | ~P80-120B | Focused relief |
A timely debate as Filipinos seek post-holiday financial breathing room.