Senator Loren Legarda has filed two bills seeking to lower the cost of essential goods and services by reducing the value-added tax (VAT) on items used by ordinary Filipinos while expanding exemptions for basic necessities and healthcare.

The proposals come as the administration of Ferdinand Marcos Jr. continues to explore tax reforms aimed at easing the burden of rising living costs while maintaining government revenues.

Legarda said the measures are designed to create a more progressive VAT system and provide relief to low-income households.

“The measures will immediately provide relief to those with lower incomes, helping them survive day-to-day and build a better future for their families,” Legarda said.

Under Senate Bill No. 1851, or the Differentiated Value-Added Tax Rates Act, goods and services commonly used by poor and middle-class Filipinos would be subject to a reduced 10 percent VAT, while luxury goods and other high-value items would remain taxed at 12 percent.

These include designer brands, jewelry, expensive watches, premium perfumes, fine art, antiques, private aircraft, luxury vehicles, and premium real estate such as penthouses and luxury condominiums. “Sin” products like alcohol, tobacco, and vaping items, as well as environmentally hazardous items such as legal fireworks, would also retain the higher VAT rate.

“This dual-rate system lowers the cost of living for most Filipinos while ensuring higher-income earners contribute a fairer share through slightly higher taxes on premium, luxury, and environmentally hazardous items,” Legarda said.

“We also hope it encourages our countrymen to spend their hard-earned income prudently,” she added.

Meanwhile, Senate Bill No. 1857, or the Murang Bilihin at Serbisyong Medikal Act, seeks to fully exempt essential goods and health-related services from VAT.

Items proposed for exemption include staple foods such as canned fish, chicken, beef, milk, eggs, flour, rice, cooking oil, instant noodles, and vinegar, as well as household essentials like laundry soap, toilet paper, sanitary napkins, and diapers.

The measure also covers basic medical services from doctors, dentists, and other licensed practitioners, over-the-counter medicines for fever, cough, flu, and body pain, and first-aid supplies such as bandages, antiseptics, isopropyl alcohol, iodine solutions, and thermometers.

Legarda said the bill also seeks VAT exemptions for basic household electricity up to a certain monthly threshold and basic internet access used for personal, educational, and essential communication, excluding premium digital services.

“In this way, we can also encourage households to conserve energy and water to avail of the exemption,” Legarda said.

The senator said the proposals aim to protect the purchasing power of low- and middle-income earners while ensuring that government revenues from luxury goods and non-essential items remain intact.

“By treating healthcare and daily subsistence as fundamental rights rather than taxable transactions, the bills aim to reduce out-of-pocket costs for the most vulnerable sectors and ensure that life-saving medical care and basic necessities remain affordable,” Legarda said.

“Together, these bills protect the purchasing power of low- to middle-income earners without compromising the State’s revenue from non-essential and luxury goods,” she added.