In order to address the negative effects of the recently passed Tax Reform for Acceleration and Inclusion (TRAIN) law, Akbayan Senator Risa Hontiveros on Tuesday filed a bill that seeks to reduce the Value Added Tax (VAT) rate to 10% from the current 12.

"Bawas VAT"

Senate Bill No. 1671 otherwise known as the "Bawas VAT" bill seeks to provide relief for the lower economic deciles of the population affected by the TRAIN law by lowering the existing VAT rate to 10%.

The measure also seeks to align the country's tax system with the ASEAN region. The bill states that once the collections from a VAT rate of 10% reach 4.5% of GDP - which represents an amount exceeding the revenue being generated by Thailand's VAT rate of 7% - there is ample room to further reduce the VAT rate to achieve full alignment with the ASEAN norm of 8%.

"The government said that the TRAIN law will be beneficial in the long term. Ika nga nila, the people must make short term sacrifices for long term gains. But the truth is, the TRAIN law has a big uncompensated impact on large families and individuals earning less than the minimum wage. We are asking people who have already suffered and sacrificed so much in life to make more uncompensated sacrifices. This is simply unjust and unsustainable," Hontiveros said.

"Cut the VAT"

It's time we strengthen the people's purchasing power. It's time for the public to cut clean from regressive taxation. It's time to cut the VAT," Hontiveros stressed.

Hontiveros, who was the lone dissenter to the Senate version of the TRAIN law when it was passed on third and final reading in the upper house, said that once her bill is passed, the measure will enforce a progressive reduction in the VAT rate by immediately reducing it to 10% effective January 1, 2019.

By January 1, 2022, the measure will again reduce the rate of VAT to 8% should the previous year's realized revenues from VAT reported in the budget of expenditures and sources of financing submitted to Congress equal or exceed four point five percent (4.5%) as a percentage of Gross Domestic Product (GDP).

Source: Senate of the Philippines

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