Shift to 10% VAT could signal more borrowing, taxes

THE GOVERNMENT could raise borrowing and other taxes to offset billions in foregone revenue should it decide to reduce value-added tax (VAT) to 10% from the current 12%, Metroplitan Bank & Trust Co. (Metrobank) said.

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THE GOVERNMENT could raise borrowing and other taxes to offset billions in foregone revenue should it decide to reduce value-added tax (VAT) to 10% from the current 12%, Metropolitan Bank & Trust Co. (Metrobank) said.

“One thing is clear: reducing the VAT rate would result in a substantial loss of government revenue,” Metrobank said in a commentary attributed to Marian Monette Q. Florendo, a research and business analytics officer, and James Nathan Ang of the bank's research and market strategy departments.

Any resulting hike in borrowing or taxes could outweigh the expected benefits of lowering VAT.

Last month, Batangas Rep. Leandro Antonio L. Leviste filed House Bill (HB) No. 4302 seeking to reduce VAT to 10% from 12% to make the country’s tax system more “progressive.”

According to the measure, however, the government may opt to return the VAT rate to 12% for a year if the projected deficit is expected to surpass the programmed deficit.