Department of Economy, Planning and Development (DEPDev) Secretary Arsenio Balisacan has cautioned against proposals to lower the value-added tax (VAT) rate, saying such measures could result in significant revenue losses and undermine the country’s fiscal stability.
“Our goal is to ensure that our medium-term fiscal program goals are achieved, and that includes reducing the deficit and debt as a share of GDP,” Balisacan told reporters.
“What we want to avoid are measures that erode our revenues,” he added.
The warning follows the filing of House Bill 4302 by Batangas 1st District Representative Leandro Leviste, which seeks to reduce the VAT rate on goods and services from 12% to 10% under the proposed VAT Reduction Act of 2025.
The measure allows the President to restore the 12% VAT upon the recommendation of the Department of Finance (DOF) and the Development Budget Coordination Committee (DBCC) if the fiscal deficit surpasses targets.
Meanwhile, Cavite 4th District Representative Francisco “Kiko” Barzaga filed House Bill 5119, proposing the abolition of the 12% VAT, while Senator Erwin Tulfo introduced Senate Bill 1446, or the One-Month Tax Holiday of 2025, which would grant a one-time income tax holiday for individual taxpayers.
The tax relief measures were introduced amid mounting concerns over alleged corruption in infrastructure projects involving government officials and contractors.
Echoing Finance Secretary Ralph Recto’s position, Balisacan said lowering VAT could lead to massive revenue losses, forcing the government to borrow more, even to fund basic services such as personnel salaries.
He emphasized that instead of reducing tax rates, the government should focus on strengthening tax enforcement and improving collection efficiency to sustain fiscal health and maintain investor confidence.
Balisacan stressed that fiscal discipline remains vital to the Marcos administration’s medium-term fiscal framework, which targets lowering the fiscal deficit-to-GDP ratio to 4% by 2028 and bringing down the debt-to-GDP ratio below 60% within the same period.
“These targets are what credit rating agencies and both local and foreign investors are watching,” he said, adding that fiscal sustainability directly influences macroeconomic indicators such as interest rates and investor sentiment.
