Scrapping VAT may trigger crisis – analysts

ECONOMISTS and tax experts warned that scrapping the value-added tax (VAT) may trigger a fiscal or even an economic crisis, as the Bureau of Internal Revenue (BIR) collected P487 billion in the first eight months of 2025.

- By Aubrey Rose A. Inosante Reporter

"Abolishing VAT will put the country in fiscal crisis, drive up inflation, constrain government spending for social welfare and other vital programs, and cause a ratings downgrade," Foundation for Economic Freedom President Calixto V. Chikiamco told BusinessWorld in a Viber message.

"Feasible but insane."

VAT is a 12% tax slapped on sales, leases, barters, and imports of goods and services in the Philippines. VAT collections account for around a fifth of the BIR's total revenues.

Cavite Rep. Francisco A. Barzaga filed a bill on Monday seeking to remove the 12% VAT on goods and services, citing its disproportionate impact on lowand middle-income households amid elevated inflation and rising cost of living.

Mr. Barzaga had suggested that any revenue shortfalls could be offset by imposing “wealth taxes” and increasing excise duties on “nonessential and luxury goods,” including cigarettes, alcoholic drinks, vehicles and gambling activities.

Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms, said Mr. Barzaga’s “incredulous” proposal will result in an economic collapse.

“Removing VAT will not just result in a fiscal crisis. It would lead to an economic crisis,” he said in a Viber message.

Raymond “Mon” Abrea, chairman and chief executive officer of the Asian Consulting Group called the lawmaker’s proposal “reckless and populist.”