Finance Secretary Ralph Recto has cautioned against the potential negative effects of a proposed law seeking to reduce the country’s value-added tax (VAT) rate from 12% to 10%, warning that it could significantly cut government revenue.
During a Senate hearing on Wednesday, October 15, Recto said the proposal could force the government to borrow more just to cover its operating expenses.
“Kung magbabawas pa tayo ng revenue, baka pati ang current operating expenses natin uutangin na rin natin,” Recto explained.
He noted that while the intentions of the lawmakers behind the bill are commendable, passing it could nonetheless harm the country’s financial standing.
“I’m sure that those who have filed a bill all have well intentions. Having said that, at this point in time, if you do, I leave it to Congress. If you pass a bill, my warning will be: that there will be a possible credit rating downgrade,” Recto cautioned.
The proposal comes amid growing public pressure over government spending following reports of corruption in flood control projects.
Cavite 4th District Representative Kiko Barzaga, one of the most vocal critics of the current tax structure, has been pushing for reform.
“With the rising cost of living, inflationary pressures, and widespread calls for lax forms that promote equity and social justice, it is imperative for Congress to revisit the VAT system. This measure seeks to abolish VAT by reducing its rate from 12% to 0%, thereby relieving the tax burden on Filipino consumers and enhancing their purchasing power,” Barzaga said in a media interview on October 7.