P860B eyed from VAT, sales tax in ’27

KUALA LUMPUR, 13 AUGUST 2026 —

The Philippine government expects to collect P860.03 billion in value-added tax (VAT) and related sales tax revenues in 2027, representing a 12.8% increase from the P762.42-billion program for 2026. This growth outpaces the overall tax revenue growth, despite the current weakness in household consumption. The projected VAT and sales tax collections are part of the 2027 Budget of Expenditures and Sources of Financing (BESF), which shows an overall tax revenue growth of 9.2% to P4.85 trillion in 2027.

The BESF also projects taxes on domestic goods and services, including VAT, excise taxes, and taxes on selected services, to jump by 11.3% to P1.75 trillion in 2027. The P177.18-billion increase in these taxes would account for 43.3% of the projected P409.23-billion rise in overall tax revenues. VAT is expected to post the fastest growth among the components of taxes on domestic goods and services, with a projected increase of P97.61 billion. Excise tax collections are projected to jump by 8.9% to P380.86 billion, while taxes on selected services are seen increasing by 9.1% to P164.39 billion.

According to Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera, the projected increase in tax revenues assumes faster household consumption and economic activity in 2027. "It is achievable if domestic demand and imports recover next year. It likely assumes stronger household consumption, firmer business activity, and better tax administration and compliance," he said. The Development Budget Coordination Committee earlier attributed the higher revenue targets for 2027 to tax reforms, digitalization, and enforcement. However, Mr. Rivera also noted that the revenue outlook faces risks from weaker-than-expected consumption, slower investment, softer imports, and another external shock that keeps growth subdued.

The BESF projections already incorporate proceeds from legislated tax reform measures, which are projected to have a net revenue impact of P31.96 billion in 2027. VAT on digital services is expected to generate P24.67 billion, the largest amount among these measures. However, the Department of Budget and Management said they do not yet account for the proposed tax-relief and revenue-generating measures under the Promoting Growth, Revenue, and Equity towards Socio-economic Sustainability tax package. Estimates by the Department of Finance showed that the proposed measures would generate an average of P47.94 billion in net additional revenues annually from 2027 to 2030.

The Bureau of Internal Revenue (BIR) collected P2.003 trillion from January to July, exceeding its P1.99-trillion target for the period by P13.53 billion or 0.68%. The seven-month tally was 5.4% higher than a year earlier. BIR Commissioner Charlito Martin R. Mendoza said the agency had already collected around 60% of its full-year target for 2026, reflecting improving taxpayer compliance and sustained collection efforts. The BIR is projected to collect P3.736 trillion in 2027, up 10.1% from the P3.393-trillion program for 2026.

The government's revenue projections also take into account the impact of exchange rate fluctuations. A P1 depreciation against the US dollar could narrow the national government's 2027 budget deficit by P5.7 billion, as higher revenues are expected to more than offset increased disbursements. Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said a weaker peso would increase the peso value of interest payments on US dollar- and other foreign currency-denominated debt. On the revenue side, he said the increase would be "largely linked to import tax-related revenues, especially at the Bureau of Customs."

The government plans to raise P3.304 trillion in gross borrowings in 2027, a 20.9% increase from the P2.734-trillion program this year. Of the proposed gross borrowings, 72.3% would be from domestic sources. Gross domestic borrowings are projected to increase by 24.5% to P2.389 trillion from this year's P1.918-trillion program. The remaining P914.982 billion would be raised from external sources, up 12.2% from the P815.505-billion program for 2026. The national government's outstanding debt rose by 2.8% to P19.07 trillion at end-June from P18.55 trillion at end-May.

As the Philippine government looks to 2027, it is clear that tax revenue growth will play a crucial role in achieving its fiscal targets. With a projected increase in VAT and sales tax collections, as well as growth in other tax revenue streams, the government is optimistic about its ability to meet its revenue targets. However, as noted by Mr. Rivera, the revenue outlook faces risks from various factors, including weaker-than-expected consumption and external shocks. As such, the government will need to remain vigilant and adapt to changing economic conditions to ensure that its fiscal targets are met. Details not yet available on the potential impact of the proposed tax-relief and revenue-generating measures under the Promoting Growth, Revenue, and Equity towards Socio-economic Sustainability tax package.