BIR Ramps Up VAT Collection Drive Amid Economic Headwinds

MANILA, Philippines — The Bureau of Internal Revenue (BIR) is gearing up for a tougher value-added tax campaign this year after collections in 2025 fell short of the target, and with slower growth, weaker household demand, and volatile oil prices seen to weigh on revenues. BIR Commissioner Charlito Mendoza said the agency faces a “clearly more demanding” VAT goal this year but remains confident of hitting the P786.4-billion target, which is 15.7 percent higher than the actual take in 2025. “We are also realistic about the challenges. Slower growth, inflation, weaker consumer spending, oil-price movements, foreign exchange pressures and leakages from informal or cash-based transactions can affect VAT performance. These are the factors we have to monitor closely,” Mendoza told The STAR. The Philippines levies a 12-percent VAT, among the highest in the Association of Southeast Asian Nations (ASEAN), drawing persistent calls from the public and lawmakers to cut the rate to 10 percent to ease consumer costs during energy shocks. Despite this, the BIR official said the confidence of hitting the goal stems from strong domestic demand and business expansion. He noted that VAT is closely linked to economic activity, consumption, services, and business transactions. “At the same time, the BIR will continue to strengthen compliance through improved taxpayer monitoring, data matching, audit quality, digitalization, and closer attention to sectors where underdeclaration may occur,” he said. Mendoza said the direction is clear: fair enforcement, data-driven monitoring, and taxpayer-friendly compliance. “We will not meet the target by burdening compliant taxpayers. We will meet it by closing leakages, expanding the compliant base, improving audit quality, and ensuring that taxable transactions are properly reported,” he said. Meanwhile, VAT collections last year reached P679.8 billion or 22 percent of the overall BIR collection of P3.11 trillion. The figure was 3.9 percent below the P707.43-billion goal for last year but still 5.6 percent higher than the P643.85-billion actual take in 2024, boosted by the rollout of the VAT on digital services. According to the BIR’s annual report, among the reasons for missing the 2025 target were the hefty decline in revenues stemming from telecommunication market saturation, reduced consumer spending, and lower usage of traditional services. Other reasons were stiff competition in the sweetened beverages market, consumer shifts toward lower-priced alternatives, and higher input VAT resulting from increased importation of raw materials and foreign exchange rate pressures, the agency said. The BIR said lower cement prices after tariff cuts and weaker consumer demand for alcoholic drinks due to inflation and reduced disposable income are driving customers to shift to more affordable alcoholic beverages. It also cited reduced sugar output, the cessation of mineral operations, and the eventual closure of a major manufacturing facility as reasons for the below-target collection last year.