Finance Secretary Ralph Recto warns that reducing the current 12 percent Value-Added Tax (VAT) to 10 percent could force the government to borrow funds for regular operating expenses and potentially trigger a credit rating downgrade. Although several congressional bills propose VAT cuts or exemptions to ease consumer burden amid rising prices, economic managers caution that these reductions could lead to significant revenue losses and widen the budget deficit. Recto is concerned that such moves, especially without compensating revenue measures, would undermine the government’s fiscal consolidation programs and negatively impact investor confidence. The Department of Finance’s proposed $37.8 billion budget for 2026 is aimed at supporting strong revenue collection and reducing the deficit to below 3 percent of GDP by 2028.
Source: pna.gov.ph
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