Cutting VAT to 10% to disrupt fiscal fix By Reine Juvierre S. Alberto
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OWERING the value-added tax (VAT) rate to 10 percent would trigger a chain of economic and fiscal consequences, according to a top official from the Department of Finance (DOF). Speaking at the recent Philippine Tax Academy’s (PTA) convention, Finance Undersecretary Karlo Fermin S. Adriano said that reducing the VAT rate to 10 percent from the current 12 percent will reduce revenues to about P330 billion annually, equivalent to around 1 percent of the country’s gross domestic product (GDP). This would widen the fiscal defi-
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cit from the 2025 target of 5.5 percent to about 6.5 percent, reversing fiscal consolidation efforts. “So, definitely, we will not be able to do fiscal consolidation because our fiscal deficit last year was only 5.7 percent,” Adriano said. “And, if we do not do fiscal consolidation, if we cannot show that we are not capable of fiscal consolidation, what will happen? Interest payments will also increase,” the DOF official added. Because of this, Adriano said the country’s credit rating could be downgraded, which would then push up borrowing costs and increase debt servicing. “All of our debts will increase and that’s a cycle of more debt,”
Adriano said. If the government is really keen on lowering the VAT rate, the other option, Adriano said, is to decrease government expenditures of around P300 billion a year. However, this means government programs will also be lessened. “Definitely, there are some positives, but there are also some negatives,” Adriano noted. The House Committee on Ways and Means is currently studying the proposal to reduce the VAT rate from 12 percent to 10 percent to ease inflationary pressures and give Filipino households much-needed relief. (See: https://businessmirror.com. ph/2025/09/03/house-panel-
reviewing-vat-decrease-proposal/). Batangas 1st District Rep. Leandro Leviste filed House Bill 4302, or the proposed VAT Reduction Act of 2025, to help households save an estimated P7,000 annually. “This bill is about giving ordinary Filipinos a break. The VAT is regressive, hitting the poor and middle class the hardest. Lowering it makes our tax system more progressive,” Leviste said. However, Adriano said the country’s VAT system is not regressive, based on a World Bank study. Adriano said many VAT exemptions already exist, particularly for food, which accounts for around See “Cutting,” A2
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Tuesday, September 30, 2025 Vol. 20 No. 352
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By Cai U. Ordinario @caiordinario
HE country’s latest external debt service data released by the Bangko Sentral ng Pilipinas (BSP) sends a warning to policymakers regarding taking in more foreign debts, according to local economists. The data showed the country’s external debt service already reached $148.87 billion in the January to June period this year. This showed that in the six-month period, external debt service already breached the total of $137.63 billion posted in the whole of 2024. The external debt service data showed the government accounted for the bulk of the amount at $94.8 billion in the six-month period. This was 18.76 percent higher than the $79.825 billion posted in the same period last year. “This is a warning signal, though not necessarily a fatal one. It underscores the growing burden of foreign liabilities, higher amortization schedules, and in-
terest cost pressures,” Philippine Institute for Development Studies (PIDS) Senior Fellow John Paolo Rivera told BusinessMirror. “The concern is that this could strain forex reserves, tighten fiscal space, and heighten rollover risk especially if global rates stay elevated or the PHP [Philippine peso] weakens further,” he added. However, Union Bank Chief Economist Ruben Carlo Asuncion told this newspaper that the latest data “is not alarming” given the country’s debt to GDP ratio stands at 31.2 percent. He added that the country’s dollar reserves or the Gross International Reserves (GIR) stood See “6-month,” A2
WTTC: TRAVEL, TOURISM SET FOR HISTORIC $2.1-T BOOST By Ma. Stella F. Arnaldo Special to the BusinessMirror
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HE global travel and tourism sector is headed for another record-breaking year, projected to contribute an historic high of US$2.1 trillion to the worldwide economy, surpassing the record high of $1.9 trillion in prepandemic 2019 by 10.5 percent. At the launch of its latest Economic Impact Report (EIR) at the 2025 World Travel & Tourism Council (WTTC) Global Summit in Rome on Monday, WTTC Interim Chief Executive Officer Gloria Guevara said: “These results tell a story of strength and opportunity. The United States remains the world’s largest travel and tourism market, China is surging back, Europe is powering ahead, and destinations across the Middle East, Asia, and Africa are delivering record growth.” The EIR also showed that 371
million jobs are estimated to be supported by the travel and tourism sector, almost 4 percent more than the 357 million jobs last year. “By 2035, one in eight jobs worldwide will be supported by travel and tourism, with an additional 91 million new jobs supported, the majority in the Asia-Pacific region, resulting in one in three new jobs globally supported by the sector,” the report added. Confidence in the sector remains strong with the EIR seeing global investment continue to rise this year after exceeding $1 trillion in 2024. Last year’s investment level was 9 percent more than in 2023. “The US, China, Saudi Arabia, and France together accounted for more than half a trillion dollars of that investment [last year],” the reported noted.
Most powerful market
DESPITE being the “world’s See “WTTC,” A2
REEF RELIEF A remote ranger station stands on Tubbataha Reefs in the Sulu Sea, Philippines, guarding the Unesco marine reserve from illegal fishing and monitoring diving activity. On September 27, 2025, Unesco announced the designation of 26 new biosphere reserves, bringing the global total to 785 sites across 142 countries. The coral-rich reefs of Tubbataha are part of the planet’s most fragile ecosystems that the program aims to protect, alongside restoration work in Palawan’s Pangatalan Island. Unesco says at least 60 percent of biosphere reserves worldwide are already affected by climate change, making efforts to sustain fisheries and safeguard marine biodiversity more urgent than ever. SIMON GURNEY | DREAMSTIME.COM
DICT: Blockchain a weapon vs corruption By Lorenz S. Marasigan
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HE Department of Information and Communications Technology (DICT) is turning to blockchain as its weapon of choice against corruption, banking on the technology’s permanence to protect government transactions from tampering or erasure. ICT Secretary Henry Aguda said blockchain’s strength lies in its design: data stored on the chain cannot be altered or deleted, creating a permanent, verifiable record of transactions. Aguda described this feature as an “immutable ledger” that would allow the public to trace everything from budget allocations to actual purchases, ensuring a single ver-
sion of the truth. “The nice thing about it is it’s immutable. So if there [is] anything unusual in the database, even if you don’t see it now, you can still find it down the road,” he said. “You have an immutable ledger, meaning it will forever be there. It’s a single version of the truth.” The DICT chief said this digital safeguard comes at a critical moment, as the government grapples with revelations that some Department of Public Works and Highways (DPWH) employees tampered with or wiped out project records that could have implicated them in the multibillion-peso flood control corruption scandal. The Independent Commission on Infrastructure (ICI) recently
disclosed that some files had been destroyed, complicating efforts to establish accountability for projects that were either substandard or never built at all. “[With blockchain] the data is not stored in one place, it’s distributed. It’s not like we can just delete or destroy the server,” Aguda said. At the same event, FPJ Panday Bayanihan Party-list Rep. Brian Llamanzares, vice chair of the House Committee on Appropriations, pushed House Bill 4489, or the proposed Blockchain for Government Transparency Act. See related Story on page A4 Economy. The House measure seeks to mandate that the entire national budget be placed on blockchain,
ensuring citizens can independently verify every peso allocated, released, and spent. “When we’re talking about blockchain and how it works, we want all government transactions to be verified on the chain. What we’re doing is putting digital infrastructure in the Philippines that allows people to view these through a public portal,” Llamazares said. Marc Boiron, the CEO of blockchain company Polygon Labs, noted that “putting a national budget onchain shows a bold commitment to transparency and accountability.” “This is exactly the point of blockchain technology, and it positions the Philippines as a leader that others will want to follow,” he said.
PESO EXCHANGE RATES n US 58.2580 n JAPAN 0.3897 n UK 78.1123 n HK 7.4880 n CHINA 8.1652 n SINGAPORE 45.0809 n AUSTRALIA 38.1299 n EU 68.1910 n KOREA 0.0413 n SAUDI ARABIA 15.5346 Source: BSP (September 29, 2025)